The Saints gave up a 1-0 lead to fall 2-1 to their 10-man opponents on Saturday, leaving Jones with a run of seven losses in eight games as their manager.
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Jones was given a stay of execution after last weekend's 3-0 defeat at Brentford but the board were unhappy with another tough defeat.
It is believed assistant head coach Ruben Selles would be a contender to take over.
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A statement from the club read: "Southampton Football Club can confirm it has parted company with Men's First Team Manager Nathan Jones.
"First Team Coaches Chris Cohen and Alan Sheehan have also left the club.
"First Team Lead Coach Rubén Sellés will take charge of training and prepare the team ahead of next weekend's game against Chelsea."
Saints had taken an early lead in the 24th minute through Carlos Alcaraz, and things got even better when Mario Lemina saw red shortly after to give them a man advantage for over an hour.
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However, Southampton couldn't capitalise, with Wolves equalising through a Jan Bednarek own-goal before taking three points with a late Joao Gomes winner.
The result lifted Julen Lopetegui's Wolves five points clear of the relegation zone, and left Southampton rock bottom in 20th.
That means Jones has seven losses out of eight in the league since his November appointment, when he replaced Ralph Hassenhuttl by signing a three-and-a-half-year deal.
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Last time out Southampton were taken apart 3-0 by Brentford, but losing 2-1 to ten men was arguably just as bad.
It was believed that Jones was already at risk ahead of the match, but sporting director Rasmus Ankersen, who brought him in from Luton, was keen for at least one more game.
But with that match going the wrong way, Jones' departure has been confirmed, with Southampton desperate not to end their 11-year stay in the Premier League.