Harry Redknapp has quit as manager of Southampton, club chairman Rupert Lowe told the club's website on Saturday.
Lowe said: "He told me that he regarded his employment with the club as being at an end and that he would deal with the necessary paperwork at the beginning of next week."
Redknapp has been strongly linked with a return to Premier League Portsmouth, a club he left a year ago.
Portsmouth, third from bottom of the league with only two wins in 14 matches, sacked French manager Alain Perrin last week.
Redknapp walked out on Portsmouth after differences with chairman Milan Mandaric, angering many of their fans two weeks later by joining bitter south coast rivals Southampton.
But he was unable to stave off relegation last season and Southampton are 12th in the 24-team second division.
Speculation has been rife since Perrin's sacking about Redknapp returning to Portsmouth, which Redknapp has told Lowe he regards as his "spiritual home."
Lowe told the website it had been a very complicated situation. "I keep pinching myself and expecting to wake up," he said.
Lowe added: "I had hoped that Harry would lead us back to the Premiership and despite our different backgrounds I have enjoyed working with him."
Southampton director Andrew Cowen told the website: "Gobsmacked is too small a word. You don't even get a plot like this in Star Wars."
