The news comes on the back of intense speculation over the 50-year-old’s future following the humiliating 4-1 defeat by London rivals Fulham at Selhurst park on Monday night.
It is understood that Holloway offered his resignation in an hour-long meeting with Palace co-chairman Steve Parish after Monday’s game but was in the end persuaded not to quit.
The loss to the Cottagers left Palace five points adrift of safety in the Premier League table, with just three points to their name after eight games.
“Ian felt that a new approach might help keep us in the division,” chairman Steve Parish said.
“I’ve enjoyed every minute of working with Ian. He leaves our club with his head held very high.
“I’d like to put the record straight. We’ve never fallen out. We’ve worked together brilliantly. We feel we need to move on to progress.”
Assistant manager Keith Millen will take temporary charge of the game against Arsenal on Saturday.
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