Chairman Adam Pearson has spoken on the situation: "It's been a difficult couple of days but results weren't good enough and that's what it boiled down to.
"I decided on Tuesday that we had to take action sooner rather than later because we're going into a new stadium and have to have some forward momentum.
"At the moment things didn't appear to be going the right way and as soon as I knew that Peter Taylor was interested in the job he was the man.
"He's got great experience at this level and has enjoyed recent success with Brighton and Gillingham.
"He wanted a challenge himself and to bring an ex-England manager here who is at the peak of his career is a tremendous coup for the club."
49-year-old Taylor has agreed a three-year contract. He is as yet to name any backroom changes, although Pearson has said that Molby's right hand man Gary Barnett has followed the Dane out of the club. Both have received "the full amount that they are entitled to" in their pay-off.