The German arrived at Huddersfield in November 2015 with the West Yorkshire club struggling in the Sky Bet Championship, before stabilising their position and securing promotion to the Premier League the following season and then defying the odds to secure top-flight survival.
However, a run of nine Premier League games without a win leaves Huddersfield with just 11 points from 22 games.
“I had no intention of sacking David this season,” Huddersfield chairman Dean Hoyle said. “Subsequently David – being the great man he is – came to us and made it clear that he needs a break from the rigours of football management.
“We discussed making that change immediately, but he also made it clear that he would give his all for the rest of this season before departing in the summer if we preferred.
“After a long discussion we all felt that David staying at the club until the end of the season was best, but we’ve kept discussions open and we all now feel that the time is right to part ways.”
Former Huddersfield captain Mark Hudson, who served as under-23s coach under Wagner, will take charge of Huddersfield for their next game, against Premier League champions Manchester City.
“It’s a very sad day, but now we have to look to the future,” Hoyle continued. “That’s what football and our immediate situation demands.”
“I’ve asked Mark Hudson to take this weekend’s Premier League game against Manchester City.
“He knows how to play our game at its best and he knows the squad, so he’s perfectly placed to do so. Along with the technical staff, we’ll give him all the support we can ahead of the game.”