The move reportedly followed a crisis board meeting after nine players told the board they were struggling to work with Furner.
Assistant Andrew Dunemann will take over as interim head coach for the remainder of the season.
"The board made the tough decision (to sack Furner) feeling the team's inconsistent performances were not reflective of the talent within the squad and have decided to pursue a different direction for the future of the club," said the club in a statement.
"The board noted the wonderful service over many years that David Furner has made to the club from his days as a player and more recently a coach and said he will leave his tenure at the club as one of the Raiders' most loyal and respected figures.
"They noted the difficulty in the decision and said it was one of the saddest days in the club's history."
The decision comes with the Raiders in ninth position and battling to get into the top eight for the finals with just three rounds to go.
It's the first time the Raiders have ever sacked a coach and the decision to sack Furner is the more momentous because of his family's close connections at the club where his brother Don is chief executive.
Their father Don coached the Raiders from 1982 to 1987.
Furner, 42, had held the job since the start of the 2009 season and his recent reign has been hampered by off-field problems with star players, notably fullback Josh Dugan who was sacked and headed to St George Illawarra in mid-season this year.
Fellow NSW Origin back Blake Ferguson has also had behavioural issues off the field and is believed to want out of the Raiders.