"The timing is far from ideal but we didn't feel we could sit back and hope matters would change without addressing issues critical to a high-performing team culture," Cricket Australia chief executive James Sutherland told a news conference in Bristol, southwest England.
"It obviously isn't the type of change we want to make three weeks out from the Ashes commencing but we believe a change is needed."
VIDEO: Mickey Arthur sacked
"I'd like to acknowledge Mickey Arthur, his commitment and dedication to the task and passion for the Australian cricket team," Sutherland said.
"Mickey Arthur is a good man, he's tried his utmost to do a good job and unfortunately, at the end of day he just hasn't quite done that.
"We decided things weren't improving -- we could let things be as they are."
Sutherland praised former Australia batsman Lehmann, who played 27 Tests, as the "obvious choice to replace Mickey".
"As a cricketer and a coach he has an outstanding record, he's very highly regarded in cricket and within the Australian team," said Sutherland of Lehmann, who was appointed on a two-year deal.
"His performances recently as coach of Queensland and the Brisbane Heat have seen him win titles in all three formats of the game.
"We've recognised that by giving him development opportunities as a coach, most recently as assistant coach to the Australia A team here in England."
Sutherland also confirmed that Australia captain Michael Clarke, currently sidelined with a back injury, would stand down as a selector.
South African Arthur, the first foreign-born coach of the Australian team when appointed in November 2011, appeared to have paid the price for a 4-0 Test series loss in India, a poor Champions Trophy campaign and a lack of discipline within the team.
This culminated with an incident which saw David Warner punch England's Joe Root in a bar in Birmingham, central England, after Australia's Champions Trophy loss to their arch-rivals earlier this month.
Warner was fined Aus$11,500 and suspended until the start of the Ashes series.
Several others players were with him in the bar in the early hours of the morning, raising concerns about the culture inside the Australian squad.
It followed vice-captain Shane Watson, James Pattinson, Mitchell Johnson and Usman Khawaja all being dropped during the India tour this year after failing to submit feedback requested by team management.
Arthur, whose Test record since taking over in 2011 was 10 wins, six losses and three draws, maintained he did not feel let down by his players.
"The reality is when you take a job on as head coach you are responsible for the outcomes," Arthur told reporters.
"I don't feel let down, At the end of the day you live and die by the sword. I gave it 100%. The disappointing thing is I think we were nearly there to cracking it.
"We handled the Warner incident by the book," he added. "The players will be fine. There's a really good coach coming back in.
"Nobody likes losing their job. I've given this job 100 percent commitment and if it wasn't good enough, so be it."
Arthur said he would like to see some "real standards" all the way through from Under-19 level but Clarke, flanked by Lehmann in the third of three back-to-back news conferences, said: "We have no excuses for not upholding those values.
"It's a privilege to be part of the Australian cricket team and you have to uphold it," he added, saying he was "shocked" by Arthur's exit.
"We are here to have success on this tour and we have time, a couple of practice games (before the first Test)."
The 43-year-old Lehmann, who played for Yorkshire alongside ex-England captain Michael Vaughan, promised there "won't be any ongoing problems".
Lehmann has a reputation as an old-school coach, keen to encourage his players to socialise together.
However, Lehmann said Monday: "It's important to talk about the game whether it's with a beer or a Diet Coke."
England hold the Ashes and will be looking to win their third successive Test series against Australia, something they last managed in the 1950s.
"But Lehmann, asked if Australia could regain them, replied: "Yes."