Rafael Benitez will leave Newcastle when his contract expires on June 30, the Premier League club have confirmed.
The 59-year-old had been in talks over a new deal but will now leave the club after failing to reach an agreement.
Newcastle confirmed Benitez's departure in a statement on Monday, which read: "It is with disappointment that we announce manager Rafael Benitez will leave Newcastle United upon the expiry of his contract on 30th June 2019.
"We have worked hard to extend Rafa's contract over a significant period of time, however it has not been - and will not be - possible to reach an agreement with Rafa and his representatives.
"Rafa's coaching staff, Paco de Miguel Moreno, Antonio Gomez Perez and Mikel Antia, will also leave the club on 30th June.
"We would like to thank Rafa and his coaching team for their efforts over the last three years and their significant contribution to what has been collectively achieved.
"We would also like to thank our supporters, players and staff for their patience during a period of uncertainty. The process to appoint a successor will now begin."
Benitez leaves Newcastle after three successful years in charge at St James' Park.
The Spaniard first took over from Steve McClaren in March 2016, with the club 19th in the Premier League.
He could not save Newcastle from relegation but stayed in charge and guided the club to an immediate return to the Premier League, winning the Sky Bet Championship title.
After overseeing two mid-table finishes since their return to the top flight, Benitez wanted the tools for Newcastle to compete for a European qualification place and potentially lift a domestic trophy.
However, the former Liverpool and Real Madrid manager has now chosen to leave the club at the end of the month.
Sky sources understand Benitez is increasingly likely to take up a £25m-a-year offer to manage Chinese club Dalian Yifang.
A number of Chinese teams, including Shanghai SIPG and Guangzhou Evergrande, have been interested in Benitez in recent years.
The Spaniard is not allowed to talk to potential suitors until his contract runs out on Sunday.
However, Sky sources understand Benitez would welcome the opportunity to manage Dalian, who are currently 11th in the Chinese Super League.
Analysis: Sky Sports News' Keith Downie
"Rafa is too big a manager for Newcastle in its current guise and in terms of the way they're currently run.
"He wants to be pushing Newcastle to win trophies and get into Europe, whereas Newcastle in the last few years and in terms of expenditure want to remain in the Premier League.
"With the exception of Miguel Almiron, the spending has been small; they haven't been able to compete. That has really irked Rafa. Not only did he want a bit more to spend, he also wanted the freedom to sign older players. Rafa had to work so hard to sign Salomon Rondon on loan.
Honestly thought the two would somehow find a resolution, so I’m shocked this has come today. Forget takeovers, keeping Rafa Benitez was the most important thing for NUFC and they’ve failed. Sadly the Spaniard has proved to be too big a manager for NUFC under its current guise.— Keith Downie (@SkySports_Keith) June 24, 2019
"He wanted to sign him long-term but that doesn't fit the mould of who the hierarchy want him to sign; they want players around 24, 25 with resale value.
"There has been a stand-off on a number of issues and the way Newcastle are run, it's been very difficult to come to an agreement.
"This will go down so badly on Tyneside. Rafa was paid very handsomely - at almost £6m a year, he was one of the highest paid managers in the Premier League - but it was about money to spend on players and the freedom in the transfer market.
"He was hoping that might change but the trust between Rafa and Ashley over three, four, five transfer windows has completely eroded.
"Where they go next, who knows, because they are big shoes to fill and he was adored by the fans."
Analysis: Gary Neville
"There's been tension there over the last year or two over whether he'd get the support or not - it's finally happened.
"It's not a surprise, he's a manager with great ambition and a track record. I think he's had enough. What will happen next? Who knows. The owner has been trying to sell it - it's been a mystery.
"I've always felt sad going up to Newcastle as there is no connection between the owner and the fans, and the players and the manager, which you need at a football club to be successful."