Mario Balotelli's agent Mino Raiola has revealed that the striker will not be leaving Anfield this summer.
Graham Dorrans has signed a two-year deal with Norwich City following a successful loan spell with the club.
The Millers are eight points adrift of the npower League Two play-offs with nine games to go and with promotion looking unlikely, chairman Tony Stewart has removed Scott from his position.
A club statement read: "Rotherham United have this afternoon parted company with first-team manager Andy Scott.
"The club would like to place on record our thanks for Andy's time and effort whilst he has been with Rotherham United, and we wish him well for the future.
"The club have now started the search for a new manager."
Scott was only appointed last April following the dismissal of Ronnie Moore, who left with the club in the play-off positions last March, but after receiving a hefty budget and touting his team for a promotion challenge he has been unable to deliver.
Saturday's defeat at Oxford effectively spelled the end of their play-off ambitions, but the move still comes as something as shock as Scott carried out his usual pre-match press requirements on Monday morning.
The Millers play Macclesfield on Tuesday night, but it is currently unclear who will take charge.(reopens) Stewart made the decision to give a new man time to assess the squad ahead of next season.
"It is a crucial point of the season and we are moving into a new stadium next season," Stewart told Press Association Sport.
"We're disappointed we're not pushing for promotion and the board and I felt we needed a change.
"We either had to do it now or wait until the end of the season and we thought we would do it now so we can a new man in and get prepared for next season."
And Stewart is open to the possibility of Mark Robins returning to the club.
Robins was at the helm of the Millers when Stewart saved them from extinction in 2008 and they pair enjoyed a good working relationship before the former Manchester United striker joined Barnsley in acrimonious circumstances in 2009.
But Robins, who saved the Millers from relegation when starting with a 17-point deduction in the 2008-09 season, is currently out of work and would be welcome back at the Don Valley.
"We want to have a look at the options. I don't have a set type, we have to be open minded," Stewart added.
"The new stadium has to be a draw and we are hoping to get a high-calibre manager.
"I will look at everybody and that includes Mark Robins."
Scott's assistant manager Darren Patterson will take temporary charge of the team.