Exit code 127 is a standard Linux exit code that indicates the command or binary being executed within a container could not be found. Common causes of this error in Kubernetes and Docker include missing commands, incorrect paths, missing dependencies, shell interpreters, syntax errors, insufficient permissions, image compatibility issues, volume mounts, environment variables, and Kubernetes RBAC policies. To diagnose the issue, inspect the logs of the Pod using kubectl logs <pod-name> or describe pod <pod-name>. Fixing this error involves addressing the specific problem revealed by the logs, such as installing missing commands, correcting paths, ensuring dependencies are installed, and checking for errors in scripts.