Former Spurs player Sherwood was appointed head coach following the departure of Andre Villas-Boas in December, but, despite a strong start to his time in charge at White Hart Lane, he came under recent criticism following a poor run of results and a number of off-field incidents.
Spurs announced the news on their official Twitter account, with chairman Daniel Levy also releasing a statement on the club's website.
The statement read:
“We appointed Tim mid-season as someone who knew both the players and the Club.
“We agreed an 18-month contract with a break clause at the end of the season and we have now exercised that option.
“Since appointing Tim as Assistant First Team Coach in 2008 and then as Technical Co-ordinator in 2010 and Head of Football Development in 2012, we have been supportive of him during football management changes throughout that period. On behalf of the Club, I should like to state our thanks for all his efforts during his years with us. We wish him great success in his managerial career.
“Moving forward, now the season is over, we shall embark on the process of finding a new Head Coach. We have a talented squad and exciting young players coming through. We need to build on this season, develop our potential and inspire the kind of performances that we associate with our great Club."
Sherwood leaves Tottenham having failed to land Champions League football, but the former midfielder departs with the highest winning Premier League percentage of any manager in their history.
59% - Tim Sherwood had the highest winning percentage of any Tottenham Hotspur manager in Premier League history. Gilet.
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