The Athens club has managed 10 wins in 13 league matches so far this season so the exit came as a surprise.
Greece Under-21 coach Nikos Nioplias has replaced Ten Cate.
A statement on the Panathinaikos official website said: “Panathinaikos announces that following a meeting between the chairman, Mr Nikolaos Pateras and the coach of the team, Henk ten Cate, that they have agreed to end the collaboration.”
A statement from Ten Cate said: “It was an honour for me to coach Panathinaikos and the results we had backed up my work.
“I have laid the foundations for the team. I respect the fact that certain people can not be pleased with the complete picture but myself and the staff gave everything to be successful.
“The decision of the chairman will not influence the friendship we developed.
“Finally, I would like to thank all the fans of Panathinaikos for their support and I hope that the team wins the title.”
