Last night I was just bullshitting and my unqualified contention was that Jaws had done it (more on that later).
But having just spent some time with google, here are some other ideas I found--

What think you?


MEL BROOKS?
Blazing Saddles--the western/satire that killed the western for nearly a generation .
http://www.moviehabit.com

LEONE AND THE I-TALIANS?
Melville disapproved of Sergio Leone's spaghetti westerns. "They killed the western," he complained.
http://film.guardian.co.uk/features/featurepages/0,4120,985428,00.html
Leone's tributes killed the western with kindness, and the flood of spaghettis buried it.
http://www.fistful-of-leone.com/forums/index.php?board=1;action=display;threadid=36

PECKINPAH?
In the two hours it took him to tell the story of Pat Garrett killing Billy the Kid, Sam Peckinpah killed the Western. There has been a handful of great Westerns since - The Shootist (Siegel, 1976), Unforgiven (Eastwood, 1992), Last of the Mohicans (Michael Mann, 1993), - but none of them have significantly developed the genre or taken it anywhere near as far as the heart of darkness Peckinpah reaches in this, his last Western.
http://www.sensesofcinema.com/contents/01/13/garrett.html

I've also heard Wild Bunch touted as both a grand success and death knell.

THE REVISIONISTS?
Could the revisionist movement have made audiences uncomfortable and the genre short to live? . . . Director John Ford, the artist largely responsible for many of the Western rooted formulas, arguably started this new movement in 1956, with The Searchers. The film starred John Wayne as a ruthless, racist, sexist loner holding tight to an ideology that was rapidly changing in the Old West. This trend of presenting the cowboy hero as unglamorous, crude, and jingoistic is one of the central elements of the revisionist western. Also included are authentic portrayals of unclean lifestyles, bloody commentaries on the nature of violence, and such motifs and themes presented from the point of view of more marginalized characters, including Native Americans and women.
allmovie.com

GOD VIA JOHN WAYNE?
John Wayne's last film was 1976's The Shootist. His death three years later coincided with the genre's fall.
http://www.thezephyr.com/monson/johnwayne.htm

BUTCH AND SUNDANCE?
"Butch Cassidy and the Sundance Kid" was the film that killed the Western, at least in the form it was known at the dawn of the 1970s, with 10-gallon hats, train robberies and showdowns at high noon."
http://www.azstarnet.com/sn/review/58786

MR. CLINT EASTWOOD
With Unforigven, Eastwood . . . had made his statement on the ugliness and hypocrisy of the Old West and he apparently found nothing further to say. However, with John Wayne dead, no other star or producer was capable of providing a film western which could add anything or challenge Eastwood’s movie. In effect, Eastwood had killed the western genre after 90 years of American success.
http://www.thezephyr.com/monson/eastwood.htm

THE TV CONNECTION?
About Western TV, with parallels surely: Finally, yet another factor that may have killed the Western was simply changing times. The A. C.. Nielsen Company's demographics for December 1967 have much to reveal about the viewers who watched TV Westerns. No Westerns appeared in the Top Ten for children aged ten to eleven. . . . As far as age is concerned, only the Top Ten for Adults over fifty featured more than one Western: Bonanza, Gunsmoke, and The Virginian all appearing. In the mid-Seventies the vast majority of the population, and hence the vast majority of the television audience, was between the ages of 12 and 30-the people least likely to watch Western TV shows. In other words, the Western TV series may well have died simply because the younger TV audience simply did not watch them. With such a large segment of the population tuning away from Westerns, the genre could hardly expect to get high ratings on television.
http://users.cvalley.net/canote/west.html

JAWS?
Jaws (1975) killed the Western. The special effects- centered, modern tale and summer blockbuster that changed the way studios market and when they release, also changed what they market and release, i.e. Westerns on the decline. (me)


WHO ELSE?


add-on question:

With two apaprently well-received recent films to add to the genre's "Book of Condolences", will these little every-so-often, under-the-radar pop-ups be the trend? Or could the American public and the film industry ever embrace the Western as it once did?



the two films:

The Three Burials of Melquiades Estrada (2005)
http://www.imdb.com/title/tt0419294/

The Prpostion (2005) as noted by okp actualfact
http://board.okayplayer.com/okp.php?az=show_topic&forum=6&topic_id=144040&mesg_id=144040&page=
http://www.imdb.com/title/tt0421238/