A statement released by Heath chairman Steve Isherwood said: "The club has taken the decision to relieve the manager Shaun Saunders of his duties this afternoon.
"We have an enormous amount of respect for Shaun and all the work he has put in this season and for the past six years.
"This decision has been incredibly difficult to make, especially taking this history that we have together, and the impact he has made into account.
"The club are in with a good chance of promotion this season and the decision has been made as we strive for consistency in the run-in.
"We wish Shaun the very best in the future and put on record our thanks for everything that he has done for the club.
"Director of football Nick Levett will take over as caretaker manager until a permanent manager is found and will take charge for tomorrow's game."
Saunders took over at Hanbury Park for the first time in 2015 after a successful stint at Peacehaven & Telscombe.
He guided the Blues to SCFL Division One promotion at the first attempt in 2015-16.
Heath finished top of the SCFL Premier Division the following season but they were docked nine points for fielding a banned player in several matches. The title, and promotion to the Isthmian League, was subsequently awarded to Shoreham.
The Blues went on to win the Premier Division title and secured promotion to the newly-formed Isthmian South East in 2017-18.
Saunders guided Heath to the Isthmian South East play-off semi-finals in their first ever season at step four. He then lead the Blues to 12th in the curtailed 2019-20 campaign.
Saunders stepped down in August 2020, handing the reins Lloyd Cotton, before returning to the club just two months later.