Liverpool dismissed Gerard Houllier on Monday after six years as manager.
"After considerable thought and discussion the board have decided to part company with the manager and Gerard has accepted it with typical good grace," chief executive Rick Parry said following a disappointing season in which Liverpool finished fourth in the English premier league.
Houllier said: "I arrived here six years ago as a Liverpool supporter and I leave as an even bigger supporter. I may have left Liverpool but Liverpool will not leave me,
"I will return to watch the team as a fan," he told the club's website.
Frenchman Houllier, 56, has been Liverpool manager since 1998. The former school teacher had previously coached the French national side and took Paris St Germain to the French title in 1986.
He was appointed joint manager with Roy Evans in July 1998 before taking over sole command in November.
Houllier led Liverpool to the FA Cup, the League Cup and the UEFA Cup in 2001. In October 2001 he had emergency heart surgery and was sidelined for six months.
The Frenchman and his team have struggled since his return and few of his big-money signings have made the grade.
Liverpool, four times European champions, missed out on Champions League soccer for the season just finished and scraped into next season's championship by finishing fourth.
Pressure on him has mounted in recent weeks as Liverpool considered a bid by Thai Prime Minister Thaksin Shinawatra to inject 45 million pounds ($80.6 million) into the club.