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The publisher has also announced the appointment of Sunday Mirror deputy editor James Scott as the new editor of The People, following Bailey's controversial final move to turn The Mirror into a seven-day title.
Last month, Trinity Mirror said that Bailey, who has been in the job for almost ten years, would leave the company by the end of the year.
She was facing a shareholder uprising over her reported £1.7m remuneration, including some major investors threatening to go public with their opposition.
In a statement today, Trinity Mirror said that Bailey has stepped down as chief executive of the group with "immediate effect". She is also no longer a director of the company.
Roy Greenslade writes in The Guardian that Bailey has walked away with a £900,000 payoff, as the company is honouring her contract by paying up 11 months in salary and pension entitlements.
He says that the deal was "mutually agreed" between her and the board, but it also suggests that she did not "step down" over a proposed pay cut, but was actually fired by the firm.
Trinity Mirror has appointed executive headhunters Egon Zehnder International to find a new chief executive to replace Bailey.
"The company and the board are grateful to Sly for her immense contribution and leadership over nearly 10 years," said Grigson.
"Despite the deep economic downturn, the actions she has taken with her team have ensured the company has consistently delivered robust profits. We wish her well for the future."
Bailey commented: "Newspapers are a business like no other and it's been an absolute privilege to have led Trinity Mirror in this fascinating and all-consuming role.
"Everything I've achieved during my time here has been underpinned and supported by the hard work, commitment and enthusiasm of our tremendous staff."
One of Bailey's final acts as boss of Trinity Mirror was to controversially sack the editors of the Daily Mirror and Sunday Mirror, as part of plans to merge both papers into a seven-day title.
Former The People editor Lloyd Embley has been named as the overall editor for The Mirror, backed up by two editors for the weekday and weekend editions.
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Trinity Mirror has now announced that James Scott, who has been deputy editor of the Sunday Mirror for eight years, will replace Embley at The People.
"I am thrilled to have been given this new challenge," he said. "The People is a great Sunday newspaper with a long and proud history and I very much look forward to working with the team during this exciting time for the group."
Mark Hollinshead, the managing director at Trinity Mirror Nationals, added: "I'm delighted to announce James's appointment. He is a highly-talented and experienced journalist who will bring his natural journalistic flair and drive to the role.
"The People continues to deliver a resilient circulation performance against cut-price competitors and I'm confident that James is the right man to take the title forward."
