The former Chelsea boss was appointed in 2012 when Monaco were in Ligue 2 and steered the principality club to second place in the Ligue 1 this season but that was not enough to save his job.
Sporting Lisbon coach Leonardo Jardim is widely expected to be named his replacement.
The club's vice-president Vadim Vasilyev confirmed the news of Ranieri's departure saying that the club was looking for a "change of dynamics."
"I confirm that Claudio Ranieri is leaving soon. We decided to break up. I would like to pay tribute to Claudio Ranieri, who did a good job," Vasilyev told a news conference.
"It is never easy to take a club from Ligue 2 to the Champions League. But we believe that at this stage we need a new dynamic.".
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