Crundwell is accused of stealing more than $30 million from the town of 15,000 over the past six years. Dixon's city budget is only $7 million.
She turned in a letter of resignation over the weekend, according to a Dixon Mayor James Burke, but it was rejected.
"The city opted to fire her instead because of public sentiment," Burke said. That way, he said, they could make sure "Crundwell will not be entitled to any pension."
Crundwell allegedly used the money to live a lavish lifestyle that included two horse farms and $2.5 million credit card bill.
The Dixon City Council ? four council members and the mayor -- voted 5-0 in favor of firing Crundwell.