The 35-year-old ex-Celtic and Scotland striker leaves the West Lothian club one off the bottom of the Championship, with 12 points from 17 games.
He led Livi to victory in the Challenge Cup final last season and avoided relegation on the last day.
Capped six times, Burchill joined the club as a player-coach in July 2013 after spells in Cyprus and Thailand.
A statement from the club says Burchill will "serve out the remaining period of his contract on gardening leave".
Victories over Cowdenbeath, Falkirk, Raith Rovers and Queen of the South in the final month of last season saw them climb out of the bottom two on the final day of the campaign.
Plans for this term were hampered by a signing embargo that ran from April until mid-June because of club ownership issues.
Livingston drew 1-1 with Dumbarton on Saturday, conceding an 89th-minute equaliser to remain in the relegation play-off spot, four points ahead of bottom club Alloa.
They visit St Mirren on Boxing Day, with the Paisley side three points better off.
Livingston have parted company with manager Mark Burchill after a year in the job.