Redknapp, who was heavily linked to the England manager's job before the Football Association appointed Roy Hodgson last month, had one-year remaining on his contract and had said in recent weeks he hoped to renew it.
But after a rollercoaster season where Spurs narrowly missed out on a place in the lucrative Champions League after pushing for the title, and Redknapp was cleared of tax evasion by a court, chairman Daniel Levy decided a managerial change was necessary.
"This is not a decision the board and I have taken lightly," Levy said in a short statement on the club's website in the early hours of Thursday morning.
"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."
Redknapp was appointed Spurs manager in October 2008 after Juande Ramos was sacked with the club bottom of the Premier League after taking just two points from eight matches.
He resurrected their fortunes and took them to the League Cup final that season where they were beaten by Manchester United on penalties. Further success came the following year when he led them to the Champions League for the first time after a fourth-place league finish and collected the manager-of-the-year award as a result.
An unlikely run in Europe's top tier competition saw Spurs eventually knocked out in the quarter-finals by nine-times champions Real Madrid, but only after they had turned heads by beating multiple winners AC and Inter Milan.
"I have thoroughly enjoyed my time at Spurs and am proud of my achievements," Redknapp said in the statement.
"I have had a fantastic four years with the club, at times the football has been breathtaking. I am sad to be leaving but wish to thank the players, staff and fans for their terrific support during my time there."
Redknapp was hugely popular with Spurs fans but he tested that by signing Emmanuel Adebayor and William Gallas, who both played for arch rivals Arsenal, but he was proved right as Tottenham fans were won over by their strong displays.
However, his admission during his tax evasion case in January and February that he was "the most disorganised person in the world" and that he writes "like a two-year-old and can't spell" was hardly the confession an owner of a high-flying, big-spending club wanted to hear from their manager.
During the trial, Tottenham's good form continued but once Redknapp was cleared, and Fabio Capello stepped down as England manager and a massive media-led campaign for the Spurs man to replace the Italian, problems started.
A 5-2 loss to Arsenal in February was the start of three consecutive league defeats and although Spurs rallied to finish fourth, they were denied a Champions League place by sixth-placed Chelsea, who beat Bayern Munich to win the trophy.
With no Champions League football next season and admitting last week that he would have taken the England job if it had been offered to him, speculation grew that Redknapp was set to depart making Thursday's split less surprising.
The bookies make Everton boss David Moyes and Wigan Athletic manager Roberto Martinez early favourites for a role which is likely to be highly coveted with Levy providing Redknapp with significant financial backing over his time.