The Barclays Premier League club confirmed the news on Monday, bringing to an end the Spaniard's reign at The Hawthorns.
Mel took charge of the midlands club in January, having been chosen by the Baggies as the permanent successor to Steve Clarke, who was sacked in December.
Sporting and technical director Richard Garlick said: "We would like to thank Pepe for his efforts over the past four months in helping to keep the club in the Premier League and wish him well for the future.
"Both Pepe and the club set out with the best intentions of making the appointment work. However, having reflected on events both on and off the field during our talks, it became apparent that it was in the best interests of both parties for there to be an amicable parting.
"We are grateful for the manner in which the existing coaching staff and players have rallied behind Pepe to get the club over the line in what has proved an extremely competitive division."
Mel signed an 18-month deal when he took charge of the club in January, yet they initially struggled under the former Real Betis boss.
Some decent form just after the Christmas period took them up to 14th, but Mel did not claim victory until his eighth game in charge of the Baggies, while he only won once at The Hawthorns.
They eventually finished one place and three points outside the drop zone although his tenure was also blighted by the Nicolas Anelka "quenelle" saga.
Garlick added: "Although we have managed to achieve a fifth successive season of Premier League football, it has been a very disappointing campaign and lessons have been learned.
"The search for a new head coach has now begun. We aim to find the most suitable candidate who, with the support of the structure we have had in place for six years and are presently strengthening, will enable the club to be more competitive next season."
Assistant head coach Keith Downing and goalkeeper coach Dean Kiely will remain in their current roles with the club although first-team coach David Gomez has left his post.
Despite the Baggies' struggle against relegation, a large proportion of the club's supporters appeared to stay behind Mel.
The Spaniard received loud cheers from those who stayed behind after Sunday's final game of the season against Stoke and responded by waving and blowing kisses.
But, at what turned out to be his final press conference less than half an hour later, the extent of the differences between Mel and the club's hierarchy became apparent.
Although Mel indicated he would like to remain in the job, the subtext of his statements was that he accepted it was highly unlikely.
Mel said: "I am going to listen to the chairman to find out what he wants for the future. Ten players are out of contract and we need eight or nine players to come in.
"West Brom still have time to decide whether or not they want next season to be one as full of as many problems as this one."
Mel's future had been in increasing doubt over the last two months and he has been strongly linked with a return to the Primera Liga with Malaga, where Bernd Schuster's future is in doubt.
Former Norwich boss Chris Hughton and ex-Cardiff chief Malky Mackay were quickly installed as the bookmakers' favourites to replace Mel.
Hughton has been highly regarded at The Hawthorns for some time, while Mackay is back in the market after dropping his legal battle with the Bluebirds last week.
Other potential contenders include Celtic boss Neil Lennon, Tottenham's Tim Sherwood, and former Baggies midfielder and current Aberdeen boss Derek McInnes.