The Police Commission's decision could be overridden by the City Council if at least 10 of its 15 members back Parks. If the decision is not overturned, Parks said he would remain on the job until his term is up on Aug. 12.
Commission President Rick Caruso said Parks has failed to deal with low morale, understaffing, and other problems that have plagued the Los Angeles Police Department.
In announcing the commission's decision, Caruso declared the department was suffering "a profound loss of confidence."
Parks, 58, said he was the victim of politics. He criticized Mayor James Hahn for publicly opposing his reappointment in January, weeks before the commission took up the matter.
"I believe the facts are crystal clear: For the past five years, I have tirelessly filled the leadership void," he told a news conference outside police headquarters as more than 100 uniformed officers looked on.
The mayor, who is white, was elected last year with significant support from the black community. Many black leaders denounced him for opposing the reappointment of Parks, the city's second black police chief.
"This is not a win for anyone," Hahn said at City Hall. "This is a decision that the Police Commission had to make in the best interest of the department and the city."
Caruso said the decision wasn't influenced by the mayor or the city's police union, which also opposed Parks.
He said the chief has failed to be flexible in handling discipline and morale in the short-handed department, adding that the commission was looking for — and did not get — "a sincere acceptance of responsibility for what needs to be corrected."
The chief's only backer on the panel was Commissioner David Cunningham III.
"While I understand the criticisms that guided the majority of my fellow commissioners, I believe that Chief Parks could have remedied those concerns in a second term," Cunningham said.
The City Council has 10 days to decide whether to override the action.
Parks was selected as chief by former Mayor Richard Riordan and enjoyed broad support in the City Council. The 37-year police veteran earned praise from many civil rights leaders for increasing officer discipline.
When he was appointed, there were hopes that Parks, who had worked in the internal affairs division, could restore a department tarnished by the Rodney King beating, the 1992 riots, and the investigation surrounding the slayings of O.J. Simpson's wife and her friend.
But Parks quickly ran into trouble with the Los Angeles Police Protective League, which had opposed his appointment.
The 8,300-member union issued a no-confidence vote in January, and claimed his approach to discipline was harsh, lowered morale and drove officers away. The force is about 1,100 officers below its mandated strength of 10,000. Councilman Nate Holden called such criticism hypocritical.
"When you start to discipline police officers, of course morale is going to go down," he said. Parks' case for reappointment was hurt by recent statistics showing a rise in violent crime. The city's murder rate for January through March is up 52 percent over the same period last year and almost 80 percent over two years ago.