Fabio Capello has resigned as England manager with immediate effect, the Football Association said on Wednesday in a statement, dpa reported.
Capello, 65, stepped down after a meeting with FA chairman David Bernstein and general secretary Alex Horne at Wembley Stadium over the dispute on removing the England captaincy from John Terry.
"In a meeting for over an hour, Fabio's resignation was accepted and he will leave the post of England Manager with immediate effect," the FA said.
Bernstein said in the statement: "We have accepted Fabio's resignation, agreeing this is the right decision. We would like to thank Fabio for his work with the England team and wish him every success in the future," Bernstein said in the statement.
"I would like to stress that during today's meeting and throughout his time as England Manager, Fabio has conducted himself in an extremely professional manner."
A news conference with Bernstein was scheduled for 1100 GMT Thursday at Wembley.
Tottenham manager Harry Redknapp is rated the top favourite to take the vacant job just four months ahead of Euro 2012.
England's next match is a February 29 friendly with the Netherlands at Wembley.
The Italian Capello was England manager since 2007 on a contract to expire after the continental tournament in Poland and Ukraine.
Terry was stripped of the captaincy last week in the wake of increasing dismay that his trial for alleged racist abuse has been delayed until July 9, after the completion of Euro 2012.
The 31-year-old Chelsea captain is alleged to have abused Queens Park Rangers defender Anton Ferdinand in a league match.
Capello told Italian television on the weekend that he believed Terry should have been retained as captain because he was innocent until proven guilty.
"I completely disagree with the FA about the John Terry decision and I have told that to the chairman," Capello told Italian television station Rai Uno.
Many pundits sided with the FA decision, but Manchester United boss Sir Alex Ferguson said Capello was entitled to have his own opinion on the matter as manager.