In a surprise announcement on Tuesday, Real Madrid named Lopetegui as their next manager to start work after the tournament in Russia, sparking outrage among the federation and Spanish fans at the timing of the announcement.
Lopetegui was announced as Zinedine Zidane's successor at the Santiago Bernabeu in a shock announcement on Tuesday that has rocked one of the pre-tournament favourites' preparations.
Spanish federation chief Luis Rubiales was furious at Lopetegui's decision to take the job, having signed a contract extension until 2020 just last month.
At a severely delayed press conference at Spain's World Cup base in Krasnodar, Rubiales appeared to say he felt Lopetegui's decision to join Madrid so close to the start of the tournament "obliged" him to take drastic action.
"I am here to say that we feel obliged to sack the national team manager," said Rubiales.
Lopetegui had signed a contract extension until 2020 just last month and Rubiales is reportedly angry at only being informed of his decision to join Real minutes before the European champions made the announcement public.
No decision has yet been made over who will take charge with Spain due to face European champions Portugal in Sochi on Friday.
"The future of Julen Lopetegui as Spanish national team manager hangs by a thread," said Madrid-based sports daily Marca.
"Rubiales feels betrayed and his anger has only increased as the hours have passed."
There was widespread anger among Spanish media and fans at the timing of the announcement on the eve of the tournament, with hopes high that a revitalised side could reach the heights of three consecutive major tournament wins between 2008 and 2012, including the country's only World Cup win in 2010.
"The news hit me like a bullet," wrote Alfredo Relano, editor of sports daily AS.
Este Madrid fabrica antimadridismo https://t.co/FFANnNTfwe— Alfredo Relaño (@AS_Relano) June 12, 2018
"Not because Lopetegui will be the coach of Madrid for the next three years, which seems like a good and respectable choice. But the day and way (it was announced) seemed horrible."
Spain are unbeaten in all of Lopetegui's 20 games in charge as Spain boss.
However, there were fears his appointment could open up old divisions between the Real Madrid and Barcelona factions in the Spain squad.
For the first time since 2006, there are more players from Madrid in a Spanish squad for a major tournament, with a six-strong Real contingent and just Gerard Pique, Jordi Alba and Sergio Busquets from Barça.
"The announcement has not gone down well in the Spanish dressing room, apart from the Real players who have welcomed his arrival at the Bernabeu," said Barcelona-based newspaper Sport.
According to reports in the Spanish media, the players tried to intervene at the last minute to prevent Rubiales sacking Lopetegui.
Lopetegui had a short playing career at both Madrid and Barcelona as a reserve goalkeeper.
However, his coaching career had been far from distinguished before being handed the role as Spain coach after a last-16 exit at Euro 2016 brought Vicente del Bosque's eight-year reign to an end.
After short spells at Rayo Vallecano and with Madrid's youth team Real Madrid Castilla, Lopetegui enjoyed a successful time with Spain's under-19s and under-21s.
He then spent 18 months in charge of Porto but was sacked after exiting the Champions League at the group stage in his second season.