Ljubisa Tumbakovic, 66, was fired on Saturday after reportedly coming under pressure from Serbian authorities.
Belgrade does not recognise Kosovo, a disputed territory since the bloody disintegration of Yugoslavia which broke away from Serbia in 2008, as independent.
Two of Montenegro’s Serbian-born players, Filip Stojkovic and Mirko Ivanic, also pulled out of the Euro 2020 match in Podgorica.
Montenegro’s football federation (FSCG) said the two footballers, who play in Serbia for club side Red Star Belgrade, had come under “pressure from certain circles”.
Mr Tumbakovic’s decision to boycott the match was “an unpleasant surprise”, the FSCG said. The coach, who had managed Montenegro since January 2016, won six league title and three cups during two spells with Partizan Belgrade.
“Things which have nothing to do with sports have defeated sports and football on this occasion,” the FSCG said.
“The executive board made a unanimous decision to relieve Tumbakovic of his duties after he decided not to be in charge of the national team for the match,” the federation said in a statement.
“Apart from being an unpleasant surprise, Tumbakovic’s move also constitutes a breach of his professional duties stipulated by his contract.”
The game ended in a 1-1 draw and was played behind closed doors as punishment for racist chanting aimed at England players during a match in March.
The majority (90 percent) of Kosovo’s population is made up of ethnic Albanians. China, Russia and five EU member states do not recognise it as independent but the US and other EU countries do. Britain was one of the first to recognise Kosovo in 2008.
Kosovo was granted membership of international football’s governing bodies, which prevent it meeting Serbia in international qualifiers, three years ago.
Despite that members of the Serbian and Kosovar diasporas, which fled the years of the Balkans conflict, play for different national sides across Europe.
During the World Cup in Russia, Kosovo-born Liverpool midfielder Xherdan Shaquiri, and Arsenal’s Granit Xhaka inflamed tensions between Serbs and ethnic Albanians after celebrating their goals for Switzerland against Serbia.
The pair were fined but escaped bans after making hand signals representing the double-headed eagle on Albania’s flag after their goals, which condemned Serbia to defeat.