The former Watford head coach has been under pressure since the start of the campaign, with Los Che struggling to secure a return to European football next season.
Valencia are currently marooned in 13th place in the table with 34 points from 30 games with a 12 point gap separating them from the Europa League places.
According to reports from Mundo Deportivo, the club have already made the decision to sack Gracia this summer with his current contract set to expire in July 2022.
Los Che are rumoured to have already drawn up a list of potential replacements for him in the coming months with former boss Rafael Benitez the current bookies favourite to return to the club.
Former Valencia B team coach Miguel Grau is also a possible option if he choices to break his contract with Cypriot side Pafos.