The Premier League team also said on Thursday that assistant manager Steve Clarke had left the club by mutual consent.
"West Ham United would like to thank Gianfranco Zola for his efforts during his time at the club," read a statement on their website.
"We would like to thank both him and the LMA (League Managers Association) for their professionalism in reaching a satisfactory settlement and wish Gianfranco well for the future."
"I am looking forward to finding a new challenge in the game and returning to management as soon as possible," Zola said in the same statement.
A poor start to the following campaign, however, left him on shaky ground especially after the club's takeover by David Gold and David Sullivan in January.
"West Ham United would like to thank Steve for all his hard work and commitment and wish him well for the future," said the club.
