Real Madrid fired coach Carlo Ancelotti on Monday, one season after he led the club to its 10th European Cup title.
Club president Florentino Perez said Ancelotti's successor would be announced next week.
Madrid failed to win a major trophy this season, finishing second in the Spanish league -- two points behind archrival Barcelona -- and losing in the Champions League semifinals to Juventus. It also exited the Copa del Rey against crosstown rival Atletico Madrid.
"I announce that the board of directors has taken the decision to relieve Carlo Ancelotti as coach of Real Madrid," Perez said at a news conference after a board meeting at the Santiago Bernabeu Stadium.
Perez said it had been a "very difficult decision" because Ancelotti had in two years earned his personal affection -- as well as that of the board and the fans -- and "now forms part of our history because with him we won our 10th cup."
Shortly after Perez's announcement Ancelotti posted a comment on his official Twitter account.
"I'll keep the memory of two fantastic years at the club, its fans and my players. Hala Madrid and nothing else," Ancelotti tweeted in Spanish.
Ancelotti had received an ovation at the Bernabeu after Madrid beat Getafe 7-3 in the team's final game of the season on Saturday. Cristiano Ronaldo had also shown his support for the Italian coach by posting a photograph of himself next to Ancelotti on his official Twitter account.
"Great coach and amazing person. Hope we work together next season," Ronaldo tweeted Saturday.
Nevertheless, a season without a trophy is never acceptable at Madrid. Perez said it was time the club moved on and achieved "a new impetus that will enable us to win new titles and achieve our maximum competitive level in a new phase."
Perez said it would be "a very good thing if the new coach could speak Spanish" but declined to make any comment on who might be in contention for the job. Napoli's Rafa Benitez, a former youth coach at Madrid, is widely reported to be among the candidates.
Ancelotti completed two years of the three-year contract he signed with Madrid in June 2013. Perez thanked him for his time at Madrid and said the decision to replace him was taken after the season had ended.
Perez declined to comment on exactly why the board decided to replace the coach, saying simply that "after two years, Madrid's need to win requires us to give the club a new impulse forward."
Ancelotti came to Madrid from Paris Saint-Germain, where he was replaced on the same day by former France coach Laurent Blanc.