It is understood Steele parted company with the RFU on Friday following an emergency board meeting on Thursday night.
Sir Clive Woodward had initially been linked with the performance director post but Steele opted to change the job specification to remove any role with the senior England side.
However, an RFU board meeting opted to reinstate the original job specification, only for 2003 World Cup-winning coach Woodward to rule himself out of the running to concentrate on his current role with the British Olympic Association.
The RFU later released a statement announcing the end of Steele's ill-fated reign at Twickenham.
The statement read: "The RFU board of directors can confirm that John Steele has left the union with immediate effect.
"At the current time there is nothing more we can add while discussions are ongoing and we will update further as we are able."
Steele's demise comes almost a year to the day after he was appointed with the RFU's management board announcing he would take English rugby's top job on June 9 last year.
His departure was a mutual decision made during last night's emergency board meeting, which finished at 1am this morning.
It was felt by both parties that he could no longer continue in his role and the RFU are currently meeting to agree the terms of his exit.
The RFU are expected to release more details this afternoon.
Gilbert has released a new line of rugby cleats. The Gilbert Virtuo 8S is part of the exciting new product. Check it out.
The entire All Blacks apparel line has been updated for 2013/14. Check out the New Zealand All Blacks polo.
The Nike Tiempo is a solid rugby cleat and one of few styles still made from full-grain natural leather.
The Gilbert Blitz 8S rugby cleat is a great cleat at a great price of $69.99. Get a new pair of cleats today.
A cool looking all black rugby cleat with the high performance adidas is known for. Get in the Gear!
Wear the crest of the British and Irish Lions on your t-shirt. A great look for the summer.
The All Blacks Performance t-shirt is black with hints of blue from the training jersey. Very Cool.
The New Zealand All Blacks training jersey for 2013/14. Get in the Gear!
The USA Rugby Pro Alternate rugby jersey is perfect for any fan of the Eagles. Get yours to wear during the summer Test matches.
The NEW All Blacks 2013/14 jersey has arrived at World Rugby Shop. Dare to wear the colors of the All Blacks.