Mel, who replaced the sacked Steve Clarke in January, succeeded in his mission to save the club from relegation but never appeared to win the wholesale support of the Baggies' hierarchy.
Former Norwich boss Chris Hughton and Malky Mackay, who ended his legal battle with former club Cardiff last week, were immediately installed as two of the bookmakers' favourites to replace Mel.
West Brom 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 but initially struggled and did not claim his maiden victory until his eighth game in charge.
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 team's steady slide down the Premier League table Mel appeared to retain the trust of the majority of the club's supporters, who gave him a standing ovation after the club's final game of the season against Stoke on Sunday.
But the extent of the differences between the 51-year-old and the club's hierarchy became apparent at what turned out to be Mel's final post-match press conference, when he made it clear his imminent talks with club bosses would be far from a one-way process.
Although he confirmed he wished to remain at The Hawthorns, he said he would require assurances that some of the off-field mistakes made by the club this season would be rectified.
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 Division with Malaga, where Bernd Schuster's future is in doubt.
Apart from Hughton and Mackay, other names in the frame for the post include Celtic boss Neil Lennon, Tottenham's Tim Sherwood, and former Baggies midfielder Derek McInnes, who is currently in charge of Aberdeen.
Source : PA
Source: PA