Professor Xia Yeliang, 53, had drawn the ire of school officials for his blog posts calling for democratic reforms and rule of law in China. Xia said he was told on Friday that professors and school leaders had voted to end his contract.
Chinese liberals and intellectuals had hoped the new government under President Xi Jinping that took over in March would be more tolerant of calls for reform but it appears authorities won't tolerate any challenge to their rule.
Journalists, lawyers and rights activists have been detained and arrested in recent months.
"They insisted that it was not a political decision, but I believe it is," Xia told Reuters by telephone. "They told me if I keep telling people it is a political issue, then my situation will get worse. They think I have damaged the image of the school of economics and Peking University."
Xia said he is allowed to teach until the end of January.
He plans to take his case to the university provost and hire a lawyer for a possible appeal.
"I know there is a very narrow hope for winning a lawsuit. There is no way to win. They have the whole system," Xia said.
Before the vote was held, Xia, once a government adviser and commentator in state media, told Reuters he believed he was facing retaliation for a decade of criticism of the government and party.
He said his microblog has been blocked by authorities.
University administrators could not be reached immediately for comment. Zhang Zheng, the party secretary of the university's school of economics, told Reuters before the vote was held that Xia's teaching ability was at issue.
"We're examining whether students believe his classes are taught well," Zhang said in September. "It has absolutely no connection to his political views or advocacy."
ACADEMIC FREEDOM AT STAKE
Xia said he would honour the school's request not to discuss the political elements of his case with students. He said he hopes to find a position at another Chinese university.
Xia's situation has drawn international attention, including from faculty members at Wellesley College in Massachusetts, which has a student exchange programme with Peking University.
More than 130 members of the Wellesley faculty wrote an open letter to Peking University officials in September, saying they would ask college administrators to cancel the exchange programme if Xia was fired for political reasons.
Foreign universities have rushed to set up partnerships and branch campuses in China. The zeal to gain access to the huge education market has raised questions over whether prestigious schools would have to sacrifice academic freedoms under tightly government-controlled curricula.
"What happened to Professor Xia is part of a larger ideological crackdown on higher education in China and, indeed, part of what's happening more generally," William Joseph, a political science professor at Wellesley, said in an email to Reuters.
Xia was a signatory of "Charter 08" - a manifesto organised by jailed Nobel Peace Prize laureate Liu Xiaobo - which advocates political reforms.
In 2012, while holding a visiting researcher post at Stanford University, Xia said Peking University administrators told him to return to Beijing after he used the Internet to call on Chinese intellectuals to gather publicly to demonstrate for freedom of speech and assembly.
(Editing by Paul Tait)