"It is always a hugely difficult time when a managerial change occurs and this moment is no exception," said chairman Paul Scally.
"Whilst the decision taken was made unanimously by the board, it was an exceptionally difficult one, but one which after long deliberation was felt absolutely necessary.
"I would like to wish Martin every success in his future career. I have no doubt he will be back managing very shortly and I have very much enjoyed the experience of working with him, on both a business and personal level over the past 16 months."
He won 27 of 64 games at Gillingham in total, with 20 defeats - of which eight were recorded this season.
Former West Ham midfielder Allen, nicknamed 'Mad Dog' during his playing days, made the step up to management in 2003 at then non-league club Barnet - with whom he had three stints - and has enjoyed varying degrees of success with seven clubs including Brentford, MK Dons, Leicester and Notts County.
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