(CNN) -- Kenny Dalglish's name is synonymous with Liverpool, one of England's most successful football teams, but after a disappointing second spell in charge as manager he has been sacked by the club's American owners.
Liverpool confirmed Wednesday Dalglish has been relieved of his duties by Fenway Sports Group, headed by John W. Henry, who also owns baseball's Boston Red Sox.
Dalglish won the English League Cup in February but despite huge outlay on players before the start of this season, his side struggled in the Premier League, finishing in eighth place -- their worst return for 18 years.
A statement on the club's official website read: "Fenway Sports Group (FSG) and Liverpool Football Club announced that Kenny Dalglish is to leave his post today as manager after having his contract terminated.
"After a careful and deliberative review of the season, the club came to the decision that a change was appropriate. It is not a decision that was reached lightly or hastily.
"The search for a new manager will begin immediately."
Liverpool's 2011-12 campaign was punctuated by controversy. Striker Luis Suarez was handed an eight-game ban by the English Football Association for racially abusing Manchester United's French defender Patrice Evra.
Dalglish and Liverpool's players wore t-shirts in support of the Uruguayan, who maintained his innocence, but the club were forced to apologize when the striker refused to shake Evra's hand before Liverpool's game at Old Trafford in February.
The Scot's relationship with the media became increasingly fractious and he walked out of several post-match interviews towards the end of the season.
Liverpool narrowly failed to secure a cup double earlier this month, losing 2-1 in the FA Cup final at Wembley by Chelsea, and then lost the final game of the season at Swansea.
Despite his sacking, Dalglish said it had been an "honor and a privilege" to manage the club again.
He said: "Of course I am disappointed with results in the league, but I would not have swapped the Carling Cup win for anything as I know how much it meant to our fans and the club to be back winning trophies.
"Whilst I am obviously disappointed to be leaving the football club, I can say that the matter has been handled by the owners and all concerned in an honorable, respectful and dignified way and reflects on the quality of the people involved and their continued desire to move the football club forward in the same way as when they arrived here.
"I would like to thank all of the staff at the club for their effort and loyalty. I said when first approached about coming back as manager that I would always be of help if I can at any time and that offer remains the same.
"Finally, I want to put on record my heartfelt gratitude to Liverpool's fans, who have always given me and the club their unwavering support. Without them neither the club nor I would have achieved anything."
Dalglish first joined Liverpool as a player in 1977, winning six league titles and three European Cups. He became player manager in 1985 and led the club to a league and FA Cup double in his first season.
Two more league championships followed before he resigned in 1991, two years after the Hillsborough disaster in which 96 Liverpool fans were killed at an FA Cup semifinal.
He returned as an ambassador in 2009 and helped coach Liverpool's young players. He was appointed manager for the second time when the club removed Roy Hodgson, now the England manager, in January 2011.
Dalglish oversaw an sharp upturn in fortunes as he led Liverpool away from the lower reaches of the Premier League, eventually finishing sixth, having spent big on striker Andy Carroll in January.
Several more players arrived in expensive deals over the summer but have failed to make their mark at Anfield.
Winger Stewart Downing, signed for a reported $31 million, failed to score or provide an assist in 36 Premier League games -- but has still been named in England's squad for Euro 2012.
Liverpool's owner John Henry said: "Kenny will always be more than a championship-winning manager, more than a championship-winning star player.
"He is in many ways the heart and soul of the club. He personifies everything that is good about Liverpool Football Club. He has always put the club and its supporters first. Kenny will always be a part of the family at Anfield.
"Our job now is to identify and recruit the right person to take this club forward and build on the strong foundations put in place during the last 18 months."