It is understood Thornton was told of the decision via a telephone call today (Tuesday).
Hunslet are fifth in Betfred League One following their 46-44 loss in the west Midlands, which came after they had led 34-10.
That ended a four-game unbeaten run and, ultimately, the vastly-experienced team boss’ spell at the club.
Hunslet chairman Kenny Sykes said: “Sunday's defeat follows a number of disappointing performances and results already this season.
"After due consideration the board has decided that a change of coach is needed to hopefully reinvigorate the squad and give us the best chance of success this season.
“We are very grateful to Gary for all his hard work over the last four years, particularly in dealing with a number of challenging logistical issues over Covid in the last 12 months, which were critical in getting us back playing.
“We wish him every success in the future.”
Assistant-coach Mark Cass will take temporary charge of training and Sunday’s home fixture with North Wales Crusaders.
Thornton joined Hunslet in May, 2017, having begun his career as a head coach with Batley Bulldogs in 2003.
He also had spells in charge of York City Knights and Doncaster, as well as Castleford Tigers’ academy side.
A former Wakefield Trinity and Batley player, he was the second tier’s coach of the year with Bulldogs in 2006 and won a similar award eight years later when he steered York to the third division’s league leaders’ shield.
The Parksiders have had a difficult time since Covid struck last March, when they were top of League One.
Thornton was not available for comment, but has previously identified players being placed on furlough, a break in pre-season - because of the post-Christmas lockdown - and problems arranging training facilities as factors in Hunslet losing three of their opening four games this term.