A statement by Derby County read: "These allegations have had a major adverse effect on the club and in the light of these and in order to expedite a thorough, fair and objective investigation, the club has decided to suspend John Gregory while the investigation is undertaken.
"Reserve team coach Mark Lillis will take immediate temporary responsibilty for first team affairs. No further comment will be made by Derby County at this stage."
Gregory was already due to start a five-game touchline ban after being found guilty of using foul and abusive language to a fourth official in the game against Portsmouth on Feb 08.
Our sister site Derby County MAD say that this could be an attempt by the Rams board to get rid of Gregory without having to pay up the rest of his contract - believed to be worth £1.8m.
Lillis will take charge of the Derby side for the first time tomorrow as they travel to Bramall Lane to face Sheffield United in a first division game.
He has previous managerial experience at Halifax Town, and before that enjoyed a succesful two games as caretaker manager of Scunthorpe United.
He left his role as assistant manager of the club after helping lead the side to promotion in the 1999 playoff final against Leyton Orient.
Earlier this week Lillis was also appointed as a coach with the Northern Ireland national football team.
Lillis played alongside international manager Sammy Mcllroy at Manchester City and Stockport County, and was head coach under him at Macclesfield Town before moving to Glanford Park.
Lillis said: "Sammy called John Gregory and asked if I could join him, and the manager believes it will help with my development as a coach.
"The role will initially be for the two qualifying games, but I'd like to take it further so loan as it doesn't affect my work here - Derby County is my priority.
"It will be great to work alongside international players like Stephen Lomas and Roy Carroll and I'll be able to keep an eye out for talent in other international talent in other international teams on my travels."
Northern Ireland will next be in action on March 29th, when they travel to face Armenia. Five days later they will host Greece at Windsor Park in Belfast.