Kitwe are bottom of the table with four points from 10 matches played.
Mwansa had enjoyed one of the longest reigns in the league after taking charge at Chingalika in the second half of the 2017 en route to promotion in the 2018 season.
In a statement released late on Tuesday, club media officer Nelly Nkolongo said George Phiri will be interim coach until further notice.
“Kitwe United Football Club has terminated the employment contract of its Head Coach Mr Steven Mwansa with effect from 31st December, 2020. In the meantime, Mr George Phiri has been appointed caretaker coach until the position is substantively filled,” Nkolongo said.