Nuggets forward Kenneth Faried reacted with shock on Twitter to the news of Karl's departure.
He tweeted: "So we lost a GM now a coach what's next!?"
Ty Lawson, who led the Nuggets in scoring with 16.7 points per game, was equally shocked.
"All of this is crazy and unexpected, don't know what to say," he said in a text to The Denver Post.
Karl was named the NBA's top coach after leading the Nuggets, who had the third youngest roster in the NBA, to a 57-win season.
Karl worked wonders this season with a lineup that lacked an All-Star, was beset by injuries to several starters and twisted its way through a brutal early-season schedule in which 22 of the team's first 32 games were on the road.
Relying on an old-school, up-tempo offense and a deep bench that wore out opponents, especially at altitude, the Nuggets led the league in scoring, fast-break production and points in the paint with nary a dominant scorer.
They went an NBA-best 38-3 at home, winning their last 23 games at the Pepsi Center in the regular season and going 24-4 after the All-Star break.
In his time in Denver, Karl is 423-257 in the regular season with three division titles and 21-39 in the playoffs. Karl's 21 straight non-losing seasons tie Phil Jackson for the longest streak in league history.