"Over the past five seasons, Mike has played an integral role in changing the direction of our franchise," president Brendan Shanahan said in a statement.
"Mike's commitment and tireless work ethic has put our organization in a better place and we are extremely grateful and appreciative of the foundation he has helped us build here."
Toronto, which came into 2019-20 with Stanley Cup aspirations, lost its sixth consecutive game Tuesday night in Vegas and fell to 9-10-4 on the season. On Wednesday, Shanahan flew to Arizona, where the club plays its next game, and joined general manager Kyle Dubas to inform Babcock of the decision, according to TSN's Bob McKenzie.
The disappointing start has come after a summer of major roster turnover. Among other moves, Dubas acquired Tyson Barrie and Alexander Kerfoot in a blockbuster trade that sent longtime Maple Leaf Nazem Kadri to the Colorado Avalanche. Through 23 games, the club ranks 30th in goals against, 27th in penalty-kill efficiency, and 18th in power-play efficiency.
Babcock was in his fifth season with the Maple Leafs after signing an eight-year contract that paid him $6.25 million annually. After Toronto finished last overall in his debut season and won the right to draft Auston Matthews No. 1 in 2016, Babcock led Toronto to the playoffs in each of the past three years but never beyond the first round.
"I thought we did an amazing job taking a franchise from where it was to where we had 100-point seasons, we set franchise records if I'm not mistaken, got into the playoffs. I'm disappointed, we didn't have the start to the year we wanted and that's on me," Babcock said in a statement, according to TSN's Pierre LeBrun.
"I want to thank the fans, I want to thank the media, I want to thank the city, it was spectacular. I loved every second of it. And I wish the new group nothing but success. Morgan Rielly has been here the whole time. I can't thank him enough. And all the players I got the opportunity to coach. It's been fantastic and I wish them nothing but success."
Babcock is the first NHL head coach to be fired this season.
Keefe's connection with Dubas goes back to their time with the OHL's Soo Greyhounds. The 39-year-old Keefe was then hired as Marlies head coach in 2015 and led them to a Calder Cup title in 2018 and an overall record of 199-89-22-9.