Athletic director Bob Bockrath announced the decision, saying it was made after consultation with the coach.
Hobbs was not present at the news conference.
He did issue a statement saying he disagreed with Bockrath's decision, but he thanked the administration for the confidence it showed in him when he was hired in 1992.
"Over the past six years there have been some very good times and some very tough times," he said.
Hobbs, now in his sixth season with the Crimson Tide, has a record of 104-72 but has come under fire in recent years, particularly after a 94-40 loss to state rival Auburn this season.
That was the worst loss in school history.
The Crimson Tide are 9-12 this season.
Bockrath said the decision was not based on any one event but on "a whole culmination of events over the course of the year."
He said there was a negativism around the program this year that was taking its toll on the coach and players.
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