Rafael Benitez has left Inter Milan after an agreement was reached over the termination of his contract, the Serie A club have confirmed.
Talks had been ongoing between the former Liverpool coach's agent and the Inter hierarchy to find a resolution.
A statement on the club's official website, www.inter.it, this afternoon read: "Inter Milan and Rafael Benitez can announce that they have reached a mutually satisfactory agreement for the early termination of his contract.
"Inter thank Rafael Benitez for his work in leading his team to success in the Italian Super Cup and the FIFA Club World Cup."
Benitez's agent Manuel Garcia Quilon met yesterday with Inter vice-president Rinaldo Ghelfi and technical director Marco Branca, as well as the club lawyer Angelo Capellini.
With the Spaniard back in Liverpool, speculation had been rife for the last 48 hours that he had been dismissed as Inter coach, although the club continued to deny the story until they could agree a compensation package with Benitez.
The 50-year-old's future at the San Siro had looked bleak after he appeared to issue an ultimatum after leading Inter to success in the FIFA Club World Cup on Saturday.
Benitez called for Inter president Massimo Moratti to back him in the upcoming transfer market after an otherwise poor start to the season or dispense with his services.
The five-time reigning Serie A champions sit seventh in the 2010-11 table while they only qualified second in their Champions League group behind competition debutants Tottenham.
Inter's season has been undermined by injuries, but with a 13-point gap to make up to leaders and city rivals AC Milan Benitez came under intense fire just six months into the job.
Benitez always had a tough task in succeeding Jose Mourinho, who led Inter to the Serie A, Coppa Italia and Champions League titles last season before leaving for Real Madrid in the summer.
Injuries to key personnel like Wesley Sneijder have not helped his cause, but the Nerazzurri have won just six of their 15 league games this term.
They lie closer to the relegation zone than the top of the standings.
Former Milan boss Leonardo is reportedly set to be appointed as Benitez's replacement.
Rafael Benitez factfile
1960: Born Madrid, April 4.
1981: Leaves Real Madrid after seven years without ever playing for the first team and joins third division Parla.
1983: Part of the Parla side which gains promotion to Segunda B.
1986: After retiring as a player, appointed to Real Madrid's coaching staff, starting off with the juniors and working up to the Under-19s.
1994: Leads Real Madrid's B team to seventh in Spain's Segunda Division and ends the season as assistant to first-team coach Vicente del Bosque.
1995: Appointed coach of Valladolid but sacked after 23 games with the team bottom of the Primera Division.
1996: Takes over at Osasuna in second division, but lasts just nine games after recording one win.
1997: Joins Segunda Division outfit Extremadura and leads them to promotion.
1999: Extremadura relegated from top flight after play-off defeat to Villarreal.
1999-2000: Quits Extremadura to take a year's sabbatical to study coaching in Italy and England.
2000: Appointed boss of Segunda Division Tenerife and leads them to promotion.
2001: Replaces Hector Cuper at Valencia and leads the club to their first Spanish league title in 31 years.
2004: Leads Valencia to their first ever double, lifting the league title and the UEFA Cup.
June 1: Valencia announce that Benitez and the club have agreed to part by mutual consent.
June 16: Confirmed as Liverpool manager on five-year contract.
2005: May - Wins Champions League in his first season as Liverpool come from 3-0 down to draw 3-3 before beating AC Milan on penalties in Istanbul.
2007: February - American duo Tom Hicks and George Gillett buy the club from David Moores.
May - Benitez's side reach the Champions League final for the second time in three seasons but lose to AC Milan in Athens.
2008: Relations between Benitez and the Anfield hierarchy sour suddenly with doubts over the Spaniard's long-term future.
2009: March 18 - Benitez signs a new contract after months of uncertainty, keeping him at Anfield until 2014. Liverpool finish second to Manchester United in the Premier League.
2010: April 29 - After previous early exits from the Champions League and FA Cup, Liverpool are knocked out of the Europa League at the semi-final stage by Atletico Madrid.
May 9 - A goalless draw on the final day at relegated Hull confirms Liverpool finish the Barclays Premier League season in seventh - their worst position since 1999.
June 3 - Benitez leaves his job as Liverpool manager by mutual consent.
June 8 - Inter Milan confirm an agreement has been reached for Benitez to become their new coach.
June 10 - Benitez is confirmed as manager of Inter on a two-year deal, succeeding Jose Mourinho as coach at the San Siro.
August 21 - Leads Inter to Italian Supercoppa triumph with 3-1 win over Roma at San Siro.
August 27 - Inter beaten 2-0 by Atletico Madrid in European Super Cup final in Monaco.
December 18 - Leads Inter to FIFA Club World Cup glory with 3-0 win over Congolese side Mazembe in Abu Dhabi final. Immediately then calls on club to back him in the transfer market in January or sack him.
December 23 - Inter announce Benitez's dismissal after agreeing the financial terms of his departure.