His temporary replacement is the Liverpool great, Kenny Dalgish. He is a famous player and manager at the club. More story on him.
Read article below from official site of Liverpool fc.
Hodgson exits as Dalglish takes over
Liverpool manager Roy Hodgson has left the club by mutual consent.
Hodgson, 63, won only seven of 20 Premier League games after taking over from Rafael Benitez in July 2010 and led the club to 12th in the table.
Former player and manager Kenny Dalglish has been placed in charge until the end of the season.
"Both parties thought it in the best interests of the club that he stand down," said American owner John W Henry in a statement on the club's website.
Hodgson refused to answer questions about his Anfield future following Liverpool's 3-1 defeat by Blackburn on Wednesday, the club's third loss in four Premier League games, which left them just four points clear of the relegation zone.
And when his press conference ahead of Liverpool's FA Cup third-round match against Manchester United on Sunday was cancelled on Friday, it fuelled further speculation that the former Fulham manager's tenure was drawing to a close.
"I have found the last few months some of the most challenging of my career," read a statement from Hodgson on the club's website.
"I am very sad not to have been able to put my stamp on the squad, to be given the time to bring new players into the club in this transfer window and to have been able to be part of the rebuilding process at Liverpool."
Club ambassador Dalglish will oversee team matters for Sunday's FA Cup tie at Old Trafford.
The 59-year-old won eight league titles with Liverpool as a player and manager, taking charge of the club for a six-year spell between 1985 and 1991.
He also helped the Anfield side to three European Cup triumphs before hanging up his boots.
"Kenny was not just a legendary footballer, he was the third of our three most successful managers - three giants," said Henry, who bought Liverpool in October.
"We are extraordinarily fortunate and grateful that he has decided to step in during the middle of this season."
Hodgson has extensive domestic, European and international managerial experience, which includes spells with Blackburn Rovers and Switzerland, who he guided to the last 16 of the 1994 World Cup.
He also had a period in charge of Italian giants Inter Milan.
He joined Fulham in December 2007 and steered the club away from the relegation zone, escaping the drop on the final day of that season.
He transformed the Cottagers and guided them to their highest ever top-flight finish in 2008-09, reaching the Europa League final the following year.
His results in west London were enough to persuade Liverpool, searching for a successor to Spaniard Benitez, to offer Hodgson a three-year contract in July.
Despite losing influential Argentina midfielder Javier Mascherano to Barcelona for £17.25m in August, Hodgson spent over £20m bringing in Christian Poulsen, Raul Meireles, Danny Wilson and Brad Jones, as well as signing Joe Cole and Paul Konchesky.
But Hodgson endured a tough start in his new job, as his side were knocked out of the Carling Cup by League Two Northampton at Anfield on 22 September, while a 2-1 home defeat to Blackpool on 3 October meant they dropped into the bottom three of the top flight for the first time since September 1964.
And following Liverpool's third league defeat in four matches, at Ewood Park on Wednesday, Hodgson's position at Anfield became untenable.
Former Liverpool defender now BBC Sport football expert Mark Lawrenson said he was "surprised" the team has not gelled under Hodgson.
"He was renowned for improving players at Fulham, coaching them and making them better but at Liverpool the opposite has happened," he said.
"Liverpool have gone backwards and the players he has brought in just haven't worked. I think unfortunately Roy was the wrong man at the wrong time for Liverpool and it has been a case of thanks but no thanks."
This story has been reproduced from today's media. It does not necessarily represent the position of Liverpool Football Club.
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