Since taking over from Rafael Benitez in the off-season, Hodgson presided over Liverpool's worst start to a season for more than 50 years — a dismal run of results that coincided with financial instability and a bitter court battle to oust unpopular American owners.
But even the arrival of Boston Red Sox owner John Henry in October 2010 couldn't halt the dire form on the pitch.
The club finally lost patience with the 63-year-old Hodgson after Wednesday's 3-1 loss at Blackburn. Liverpool are languishing in 12th spot in the Premier League and are sitting just four points above the drop zone.
The 63-year-old refused to answer questions on his future following the defeat at Ewood Park and speculation over his future intensified after his pre-match media briefing on Friday was cancelled.
Hodgson went to Anfield from 2010 Europa League finalist Fulham in July on a three-year contract. He left Anfield by mutual consent, a club statement said Saturday on the eve of an FA Cup match at archrival Manchester United.
Liverpool's owners Fenway Sports Group (FSG) have reportedly been looking at their possible options for a managerial change for over a week and they have now decided to act.
They had intended to see out the season with Hodgson before reassessing the situation but recent results - defeats to Blackburn and Wolves - and the deteriorating relationship with fans and associated falling attendances have prompted a rethink.
The club have turned to former player and manager Dalglish to take up the reins for the rest of the campaign and try and rescue a wretched campaign for the Merseyside titans.
"We are grateful for Roy's efforts over the past six months, but both parties thought it in the best interests of the club that he stand down from his position as team manager. We wish him all the best for the future." said Principal Owner John Henry.
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