Former Livingston, Morton, Coventry City, Hibernian and Dundee centre-half McPeak began his managerial career later, leading the Dens Park side to the Premiership during his three years in charge.
The 40-year-old led Pers to sixth place in their first season back in the second tier, but they are currently three points behind Hamilton Academical, although nine ahead of bottom side Airdrieonians.
Dunfermline said the decision to sack McPay was made by the current board but they had “made the club’s potential investors aware” of their intentions.
German football investment group Fussball GmbH put the Fife club up for sale in August.
Meanwhile, current under-18 and reserves coach John McLaughlan has been asked to prepare the squad ahead of Friday’s visit to the Championship leaders.
Dunfermline’s decision means both Fife clubs in the Championship are looking for a new manager after Neil Collins left Rovers on Saturday to take charge of Sacramento Republic in the USL Championship after just three months at Starks Park.
