The Argentinean - successor to former Black Cats team-mate Kevin Phillips - was appointed during the summer and got off to a great start in his first managerial job.
But it didn’t last and they’ve gone from challenging at the top of the table to slipping outside the play-off places.
Boxing Day’s 3-0 loss at home to Blyth Spartans was their fourth in a row.
That result brought an end to his second spell at the club after he ended his playing career with a successful three-year spell with the Mariners.
Coach Elliott Dickman will take charge until a replacement is found and could be in the dug-out for Saturday’s return game with Blyth.
The club said in a statement this afternoon: “South Shields FC can confirm the decision has been made to part company with first-team manager Julio Arca and his assistant Tommy Miller.
“The club expresses its sincere gratitude to Julio and Tommy for their efforts during their time at 1st Cloud Arena and wishes them both well for their future endeavors.
“Julio has been one of the main catalysts of the club’s growth over the last eight-and-a-half years and will always be regarded as a club legend.
“We regret that his time as first-team manager has come to an end, but this decision has been made as a result of on-pitch performances and results over the last six weeks.
“Julio, Tommy and their families will always be welcome at 1st Cloud Arena. Elliott Dickman will lead the first-team on an interim basis following Julio and Tommy’s departures, and he will be supported by Lee Picton.”