A 4-0 thrashing at the hands of Getafe on Sunday left Villarreal just three points above the relegation zone in 14th with seven points from their first six games.
“Villarreal CF and Javi Calleja have reached an agreement for him to become first team coach for the 2017/18 season,” Villarreal said in a statement.
“The club have gambled on an in-house appointment, who until now has managed Villarreal B and developed as a coach in the youth academy of the club.”
Escriba, 52, was a surprise appointment when Marcelino Garcia Toral was sacked just days before the start of the season in August last year.
“Villarreal CF have decided to rescind the contract of Fran Escriba as coach of the first team,” the club said in an earlier statement.
“The club want to thank the coach, his assistant Josep Alcacer and fitness trainer Jose Mascaros for their work and dedication.”
Escriba led the Yellow Submarine back into the Europa League by finishing fifth behind only traditional powerhouses Real Madrid, Barcelona, Atletico Madrid and Sevilla last season.
But he becomes already the second La Liga coach sacked this season after Argentine Luis Zubeldia lasted just four games in charge of bottom-of-the-table Alaves.