The Dutchman arrived at Anfield in 2024 after guiding Feyenoord to triumphs in the Eredivisie and Dutch Cup.
Slot clinched Liverpool's 20th top-flight English title in his first season at the club, but struggled in his second campaign.
“The contribution Arne has made to Liverpool FC in the time that he has been with us has been significant, meaningful and – most importantly of all to supporters and ourselves – successful," the Merseyside club said in a statement.
“At the same time, we have collectively come to the conclusion that change is necessary for the club to keep moving forward," the statement continued.
“We would like to take this opportunity to place on record our appreciation for Arne, who will always hold a special place in the history of this football club as the coach who delivered Liverpool’s 20th league title.
“He also helped guide the club through one of the most difficult periods imaginable following the loss of Diogo (Jota). The compassion and humanity he showed throughout that time said a great deal about him as a person.
“Nevertheless, the conclusion we have come to is built on a belief that the team’s trajectory is best addressed through a change of direction.
“Arne leaves with our gratitude, with a Premier League title to his name, and with the knowledge that he and his family will always be welcomed back at Anfield.”
Liverpool also said on social media that the process to appoint Slot's successor has already begun.
Slot's job security had been a topic of discussion throughout his second season, as fans grew frustrated with a series of disappointing results, and the decision to sack the 47-year-old followed an end-of-season review.
Departing Liverpool star Mohamed Salah openly criticised the team's style of play in May, calling for a return to 'heavy metal football', a term popularised by former boss Jurgen Klopp.
Andoni Iraola, who guided Bournemouth to a sixth-place Premier League finish, is among the managers being linked with the vacancy, as well as Stuttgart's Sebastian Hoeness and Pierre Sage of Lens.