Broncos.com said team owner Pat Bowlen had relieved McDaniels of his duties after guiding the squad to a 3-9 record so far this season.
The move came after the Broncos lost Sunday for seventh time in eight games, 10-6 to the Kansas City Chiefs, and also follows an incident in which both McDaniels and the team paid $50,000 fines last month for the illegal taping of an opponent's practice.
Bowlen said the NFL found a Broncos employee had videotaped a portion of the San Francisco 49ers' Oct. 30 'walkthrough' practice at Wembley Stadium in London, a day before the two teams played each other there.
In a written apology, McDaniels said he did not view the 6-minute tape. But he admitted he erred by failing to disclose the incident to the league office.
McDaniels compiled a 11-17 record in less than two seasons at the Broncos' helm.
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