Nagelsmann, who was under contract until the 2028 European Championship, has accepted the German Football Federation's request for him to step down, Bild and Sky Germany reported.
His departure leaves the door open for former Liverpool manager Jurgen Klopp, who is believed to be the federation's preferred candidate to take over.
Klopp, who left Liverpool in 2024 after a hugely successful stay during which he won the Champions League and Premier League, is currently Red Bull's global head of football but reportedly has a release clause that would allow him to take the Germany job.
If his departure is confirmed, 38-year-old Nagelsmann would become just the second national coach in German history to be sacked after predecessor Hansi Flick suffered the same fate in 2023.
Germany crashed out in a penalty shootout to Paraguay in Boston on Monday after the match ended 1-1 at the end of extra time.
The four-time World Cup winners suffered exits at the group stage at Russia 2018 and in Qatar four years ago.
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