Roy Keane quit as Sunderland manager on Thursday just five days after a 4-1 home defeat against Bolton Wanderers prompted the Irishman to question his future at the Premier League club.
In a statement on its website the club said an amicable agreement had been reached with Keane over his departure, two and a quarter years after taking charge.
"First of all on behalf of everyone here I would like pay thanks to Roy Keane for all his hard work in progressing this club, lifting its status and growing its worldwide profile," chairman Niall Quinn said.
"Roy's decision to stand aside and allow someone else to take charge of the next chapter sums up his desire to always do what is best for the club.
"The board has reluctantly accepted his decision and wish him and his family well for the future."
Former Manchester United and Ireland midfielder Keane took over in August 2006 after Sunderland, relegated the season before, had made a terrible start to the season under the temporary charge of Quinn.
His first stab at coaching proved an instant success as he steered the north east club to the Championship (second division) title and back into the Premier League.
Sunderland finished 15th in the Premier League last season and were expected to improve on that this time after some heavy spending in the transfer market.
However, five defeats in their last six league games have left them in the relegation zone, although they are only four points from mid-table security.
Saturday's defeat at home to Bolton in Keane's 100th match in charge was the club's fifth defeat in eight home league games this season and appears to have been the final straw for Keane.
"I would like to thank my staff, players, Niall Quinn and in particular the fans for their support during my time at Sunderland and I would like to wish the club every success in the future," Keane told the club's website.
Sunderland said Ricky Sbragia would take charge of the team for this weekend's match against Manchester United at Old Trafford with assistance from Neil Bailey and Dwight Yorke.