Liverpool Have Sacked Manager Kenny Dalglish

The decision came after Dalglish flew to Boston to meet with Liverpool's US owner John Henry and chairman Tom Werner.

Kenny Dalglish led Liverpool to League Cup success and the FA Cup final in his second spell at Anfield. But his side finished eighth in the Premier League, 37 points behind champions Manchester City and below local rivals Everton.

The poor league finish came after Dalglish spent millions on new players last summer. Dalglish won 35 of his 74 games in all competitions since taking over in January 2011. In that time Liverpool have drawn 17 and lost 22 matches.

Liverpool have struggled for form at home this season winning just six of their 19 league games. Dalglish was also criticised for defending Luis Suarez after the Liverpool striker was found guilty of racially abusing Manchester United's Patrice Evra.

Former Liverpool boss Rafa Benitez and Wigan's Roberto Martinez are the two early favourites to take over at Anfield.

Dalglish arrived back in England on Tuesday morning after meeting representatives of Fenway Sports Group, including Liverpool's principal owner, John W Henry, and the chairman, Tom Werner.

At the meeting, instigated by Dalglish in response to the uncertainty that has surrounded his position since defeat in the FA Cup final on 5 May, he delivered his end-of-season review and outlined his strategy for next season.

FSG, however, were dissatisfied with Liverpool's poor eighth‑place finish in the Premier League, matching their lowest league finish since they were promoted back to the old First Division in 1962.

A statement from the club said: "Kenny Dalglish is to leave his post today as manager after having his contract terminated. After a careful and deliberative review of the season, the club came to the decision that a change was appropriate. It is not a decision that was reached lightly or hastily. The search for a new manager will begin immediately."

Henry said: "Kenny will always be more than a championship winning manager, more than a championship winning star player. He is in many ways the heart and soul of the club. He personifies everything that is good about Liverpool Football Club. He has always put the club and its supporters first. Kenny will always be a part of the family at Anfield.

"Our job now is to identify and recruit the right person to take this club forward and build on the strong foundations put in place during the last 18 months."

The Liverpool chairman Tom Werner said: "Kenny came into the club as manager at our request at a time when Liverpool Football Club really needed him. He didn't ask to be manager; he was asked to assume the role. He did so because he knew the club needed him. He did more than anyone else to stabilise Liverpool over the past year-and-a-half and to get us once again looking forward. We owe him a great debt of gratitude.

Even as they paid tribute to Dalglish, co-owners Henry and Werner revealed it was the failure to come remotely close to delivering a top four finish that ultimately cost the Anfield icon his job.

"Kenny will always be more than a championship winning manager, more than a championship winning star player (but) our job is to identify and recruit the right person to take this club forward," Henry explained.

That process gets underway immediately, with bookmakers installing Roberto Martinez and former Liverpool manager Rafael Benitez - who still lives in the area - as the two overwhelming favourites for the vacant position.

But the owners have made clear they will not be rushed into any hasty decisions in finding the right man to take them towards the top four challenge they consider is the minimum requirement for next season.

They are admirers of Andre Villas-Boas and considered him a credible candidate when they sacked Roy Hodgson in January 2010.