The re-formed Rowdies missed out on a play-off position and are bottom of their conference with six wins from 28 games.
"This was a difficult decision to make but we feel it is in the best interest of our club for both of us to move in different directions," Rowdies president Andrew Nestor said in a statement.
Dalglish played for Liverpool, Celtic and Newcastle during his playing career which ended in the United States at the Houston Dynamo.
Club technical director Perry Van Der Beck will take charge of the Rowdies' final two games of the season.
