Liverpool have terminated the contract of manager Kenny Dalglish, owners Fenway Sports Group and the club have confirmed.
The announcement comes just 24 hours after the Scot returned from a meeting with principal owner John Henry and chairman Tom Werner in the United States.
Dalglish paid the price for failing to close the gap on the top four with the Reds finishing eighth despite significant investment in playing staff in his 15 months in charge.
"Fenway Sports Group and Liverpool Football Club announce that Kenny Dalglish is to leave his post today as manager after having his contract terminated," said a joint statement.
"After a careful and deliberative review of the season the club came to the decision that a change was appropriate.
"It is not a decision that was reached lightly or hastily.
"The search for a new manager will begin immediately."
Dalglish said: "It has been an honour and a privilege to have had the chance to come back to Liverpool Football Club as Manager.
"I greatly appreciate the work that Steve, Kevin, the players and all of the staff put in during my time and feel proud that we delivered the Club's first trophy in six years winning the Carling Cup and came close to a second trophy in the FA Cup Final. Of course I am disappointed with results in the league, but I would not have swapped the Carling Cup win for anything as I know how much it meant to our fans and the Club to be back winning trophies.
"Whilst I am obviously disappointed to be leaving the football club, I can say that the matter has been handled by the owners and all concerned in an honourable, respectful and dignified way and reflects on the quality of the people involved and their continued desire to move the football club forward in the same way as when they arrived here.
"I would like to thank all of the staff at the Club for their effort and loyalty. I said when first approached about coming back as Manager that I would always be of help if I can at any time and that offer remains the same.
"Finally, I want to put on record my heartfelt gratitude to Liverpool's fans, who have always given me and the Club their unwavering support. Without them neither the Club nor I would have achieved anything."
The announcement comes just 24 hours after the Scot returned from a meeting with principal owner John Henry and chairman Tom Werner in the United States.
Dalglish paid the price for failing to close the gap on the top four with the Reds finishing eighth despite significant investment in playing staff in his 15 months in charge.
"Fenway Sports Group and Liverpool Football Club announce that Kenny Dalglish is to leave his post today as manager after having his contract terminated," said a joint statement.
"After a careful and deliberative review of the season the club came to the decision that a change was appropriate.
"It is not a decision that was reached lightly or hastily.
"The search for a new manager will begin immediately."
Dalglish said: "It has been an honour and a privilege to have had the chance to come back to Liverpool Football Club as Manager.
"I greatly appreciate the work that Steve, Kevin, the players and all of the staff put in during my time and feel proud that we delivered the Club's first trophy in six years winning the Carling Cup and came close to a second trophy in the FA Cup Final. Of course I am disappointed with results in the league, but I would not have swapped the Carling Cup win for anything as I know how much it meant to our fans and the Club to be back winning trophies.
"Whilst I am obviously disappointed to be leaving the football club, I can say that the matter has been handled by the owners and all concerned in an honourable, respectful and dignified way and reflects on the quality of the people involved and their continued desire to move the football club forward in the same way as when they arrived here.
"I would like to thank all of the staff at the Club for their effort and loyalty. I said when first approached about coming back as Manager that I would always be of help if I can at any time and that offer remains the same.
"Finally, I want to put on record my heartfelt gratitude to Liverpool's fans, who have always given me and the Club their unwavering support. Without them neither the Club nor I would have achieved anything."