Twenty-four hours after his side beat Huddersfield 4-2, the 57-year-old has called time on his stay at Vicarage Road after just under nine months in charge.
Despite Watford's promising league position, Sannino said he had gone "as far as I can" in the job.
"I took over a very talented squad when I arrived - but they were boys in many ways", Sannino said on Watford's official website.
"I'm proud of what we have achieved and I have no doubt that the squad now, who look very much like men who know exactly what they must do, are very capable of getting promotion from this tough Championship league.
"I know I have given everything to Watford; I have given my heart and soul to the job and I have been happy to do this because of the wonderful support I have received from everyone - and most of all the fans, who are truly amazing.
"However I feel I have gone as far as I can so, for the benefit of me and the club, I feel the time is right for me to move on."
Sannino's departure leaves a third vacancy in the Championship, with Leeds and Huddersfield also searching for a manager.
Watford must now start their hunt, with several Italian names likely to be linked.
Under the rule of the Pozzo family, the Hornets have opted for Gianfranco Zola and then Sannino, with the latter replacing the former after he left the job in December last year.
A brief statement from the club said: "Watford FC wishes to thank Beppe Sannino for all that he has achieved while with the club, wishes him well for his future in football and extends an open invitation to Beppe and his family as guests of the Hornets at any future matches."
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