A 1-0 defeat by Stenhousemuir sent Stranraer to the foot of the table on Saturday.
The Stair Park club take on Aberdeen at Pittodrie in Saturday's Scottish Cup fourth-round tie.
Reid, 46, twice won promotion to the second tier via the play-offs with Ayr United between 2007 and 2012.
However, after leading Stranraer to last season's Championship play-offs, he could not get the side promoted as Ayr moved up a division.
A defender as a player, Reid played for Greenock Morton, Rangers, Burnley and Queen of the South among others before moving into management.
After leaving Ayr - a club he also played for - Reid worked in the Philippines managing Global FC and then had a brief spell in charge of Nuneaton Town before taking on the Stranraer job in 2015.
"After a meeting and discussion this evening, Stranraer FC can announce that manager Brian Reid has left the club by mutual consent," said Stranraer on their website.
"The club would like to thank Brian for all his endeavours over the past 20 months and wish him well for the future. Brian expressed his gratitude to the club for the opportunity to take the manager's job and was disappointed that the team weren't able to build on last season's run to the play-off final and wished Stranraer FC every success in the future."

The hurlers of Ruairí Óg Cushendall have been backed to "bring home" an All-Ireland title by Hollywood hero Liam Neeson.
The club, based in Neeson's native County Antrim, will take on Na Piarsaigh of County Limerick in the senior club final in Dublin on St Patrick's Day.
The Taken star won a schools' hurling crown with St Patrick's College in his hometown Ballymena back in 1966.
And he proved he hasn't lost his touch in the short video clip, catching a sliotar, the small leather ball used in the game, before sending it into the distance as he roared on the Ruairís.
The All-Ireland club hurling final will be live on the BBC Sport website and BBC Radio Ulster 1341MW from 13:30 GMT on Thursday 17 March.

The young girl was injured by the drug patrol dog in Belmarsh Prison, Woolwich, on 31 March.
The Ministry of Justice (MoJ) said the incident had been reported to police and the dog withdrawn from service.
In 2015, the MoJ said there were more than 530 dogs deployed in prisons in England and Wales.
The Mirror reported the attack had taken place during a routine drugs test and the girl needed to undergo plastic surgery because of her injuries.
The MoJ said it could not release more details because of "purdah" rules in the run up to the general election.

It was after the reporter Neil Sears had apparently called on the comedian to question him over his tax affairs.
But Brand received a less than positive response on Twitter.
Soon after he deleted the reporter's mobile number and email, but not before some said they had contacted him.
Some Twitter users, including former Daily Mirror editor Pier Morgan, complained that targeting the journalist was unfair, and threatened to report Brand to Twitter.
One wrote: "We take a break from our study on the woodland toilet habits of bears to tell you that Russell Brand can be very immature."
While another posted: "Unwise of Mr. Brand to tweet phone numbers, whoever they belong to."
Twitter's rules state that users can't publish someone's private information without their consent.
Russell Brand has thrown himself into political activism recently but a YouGov poll of 2,000 people found he's the celebrity seen as having the most "negative influence" on political debate.
He also recently teamed up with Limerick comic duo The Rubber Bandits for a 'Parklife' parody.
The comedian made the video after a tweet by someone pointed out the similarity between the two, which went viral with people recording parodies and mashups.
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Manager Brian Reid has left Stranraer by mutual consent, the Scottish League One club have announced.
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