The 61-year-old helped end Liverpool’s six-year wait for silverware by masterminding their victory over Cardiff City at Wembley in February, but the Reds’ miserable Premier League form culminated in an eighth-place finish.
Dalglish met with Liverpool’s principal owners John Henry and Tom Werner in Boston on Monday to review a mixed season, which included Luis Suárez’s eight-game ban for racially abusing Manchester United Patrice Evra.
“It has been an honour and a privilege to have had the chance to come back to Liverpool Football Club as manager,” said Dalglish in a statement on Liverpool’s website.
“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.”
Dalglish had replaced England manager Roy Hodgson at the Anfield helm in January 2011.
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