Redknapp had a season remaining on his contract at White Hart Lane and had been hoping to extend his deal but is now out of work, a month after missing out on the England coach's role.
"I have had a fantastic four years with the club, at times the football has been breathtaking," Redknapp said on Tottenham's website early Thursday. "I am sad to be leaving."
Everton manager David Moyes is hotly tipped to replace Redknapp, after 10 years in charge of the Merseyside club.
Redknapp, a former West Ham player, took charge at Spurs in October 2008 when they were bottom of the Premier League and secured a top-four finish the following season, steering them into the Champions League for the first time.
But Tottenham's failure to rejoin Europe's elite appears to have ultimately cost the 65-year-old Redknapp his job despite another fourth place finish for a club that hasn't won the English title since 1961.
"This is not a decision the board and I have taken lightly," chairman Daniel Levy said. "Harry arrived at the club at a time when his experience and approach was exactly what was needed.
"This decision in no way detracts from the excellent work Harry has done during his time with the club and I should like to thank him for his achievements and contribution. Harry will always be welcome at the Lane."
Redknapp's side had been on course to qualify for the Champions League again last season, spending much of the season in third place.
But the team's fortunes plummeted late in the season, throwing away a 10-point lead over fourth-place Arsenal as Redknapp was strongly linked with becoming the new England coach after Fabio Capello's resignation in February.
But after months of unsettling speculation about Redknapp's potential departure, Roy Hodgson was appointed to the England job in early May.
Tottenham missed out on a Champions League berth despite finishing fourth. England's fourth Champions League place instead went to Chelsea, which finished sixth in the Premier League but then won the European Cup to secure an automatic route back into the competition as defending champion.
Redknapp's departure represents a sudden reversal of fortuntes. A few months ago, Redknapp was being credited with developing Spurs into a team playing arguably the most exciting football in England. Now he is unemployed.
His stock soared in 2008 for the rapid improvement he engineered at Spurs after the brief and troubled reign of his predecessor Juande Ramos. Redknapp became the first English manager in 13 years to win the FA Cup.
He had a respectable career as a player alongside Bobby Moore at West Ham, before starting in management at Bournemouth in 1983.
In nine years at Dean Court, Redknapp unlocked the potential of an underachieving side, taking the Cherries to the second tier of English football and famously knocking Manchester United out of the 1984 FA Cup.
A strong seven-year stint with West Ham followed before six years at Portsmouth, interrupted by a short-lived and controversial move to local rival Southampton.
After being dogged by unproven graft allegations in recent years, Redknapp was cleared in February of tax evasion charges after being accused of concealing $295,000 of transfer bonuses in a Monaco bank account.