Executive vice-chairman David Buchler summoned him to an emergency meeting on Friday and a parting of the ways followed.
It follows Graham revealing at a press conference yesterday details of his meeting this week with the new owners, in which he claimed he was only being given 'limited funds' for strengthening the squad.
Buchler said: "I had a private meeting with George Graham and David Pleat this week and then found this morning details of it plastered across the press.
"I called George in for an explanation today and asked for an explanation. However no explanation was forthcoming and he had a defiant attitude. I am building from top to bottom a cohesive team and this is a difficult time for the club with a semi-final coming up and negotiations with players over contracts.
"We agreed we cannot work with each other. I am not prepared to have someone who is not a team player and who is not looking after the club's interests."
On Thursday, Graham revealed: "I don't think there will be big outlays. There is a budget and it is a limited budget, and I have been led to believe that is the case for next season, so it will be the same in the summer."
David Pleat has been put in charge of the side for Saturday's home clash with Coventry.
Click here to watch a video of Spurs' executive vice-chairman David Buchler giving his explanation of the decision to sack George Graham.
George Graham has been sacked after just over two years at the club.