And the statement hinted Everton would name Smith's successor in a press conference today.

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."

Smith had been in charge at Goodison Park for three-and-a-half years.

Everton are believed to be ready to launch a bid to install Preston boss David Moyes as manager.

It is understood that Moyes, 38, has an escape clause in his contract with the First Division club allowing him to leave for a Premiership team.

Moyes, who has been linked with Premiership jobs at Southampton and West Ham in the last 12 months, was also believed to have been a target for Manchester United when Sir Alex Ferguson's number two Steve McClaren left for Middlesbrough.

Archie Knox, Smith's assistant, is likely to assume temporary control of the Everton team.

Reports suggest that Everton owner Bill Kenwright is ready to hand Smith a £1million pay-off as compensation for the remaining 15 months of his contract.

The 54-year-old Smith - a former Rangers manager - succeeded Howard Kendall at Everton in July 1998.

Twice he guided the club from the brink of bankruptcy by off-loading Francis Jeffers to Arsenal and Michael Ball to Rangers.

But a run of only one win in 13 Premiership matches has seen the club nosedive into the relegation battle.