Mr Benitez relinquishes his position as team manager after six years and the Board of Directors would like to place on record their grateful thanks for his services and wish him all the best in his future career.
The Board has now asked Managing Director Christian Purslow, with the assistance of Club Ambassador Kenny Dalglish, to begin a formal search to identify and assess potential candidates for the managerial position.
No timescale has been placed on the process and Liverpool FC will make no further statement until a new manager is appointed.
LFC Chairman Martin Broughton said: "Rafa will forever be part of Liverpool folklore after bringing home the Champions League following the epic final in Istanbul but after a disappointing season both parties felt a fresh start would be best for all concerned.''
Rafael Benitez said: "It is very sad for me to announce that I will no longer be manager of Liverpool FC. I would like to thank all of the staff and players for their efforts.
"I'll always keep in my heart the good times I've had here, the strong and loyal support of the fans in the tough times and the love from Liverpool. I have no words to thank you enough for all these years and I am very proud to say that I was your manager.
"Thank you so much once more and always remember: You'll never walk alone."