The club said in a statement: "Everton Football Club wishes to announce that its team manager Mr Walter Smith OBE has today left the club, his contract having been terminated.
"The club wishes to thank Mr Smith for his service since his appointment in the summer of 1998. The club has now begun the process of identifying and then appointing a new manager, something which, it is hoped, will be concluded as swiftly as possible.
"No further comment will be made until the club is in a position to name its new team manager."
It is thought that David Moyes will be named as the new manager at an 11am press conferance.