Houllier is leaving Villa because of concerns over his health after his recent heart problems.
Villa will now step up their search to find a replacement, with Fulham’s Mark Hughes one of the early names linked with the post.
Houllier was unable to take charge of team affairs for the final five games of the season and doctors have advised that he take more time to recuperate.
Villa chief executive Paul Faulkner said: “I would like to thank Gerard for his considerable efforts over the past nine months and for the dedication, commitment and work ethic he has demonstrated as Villa manager.
“I know I speak for everyone associated with Aston Villa in expressing our hope that Gerard will return to full health as quickly as possible and we wish him all the best for the future.”
Faulkner added: “As a board we are very conscious of the need to ensure that the club is prepared fully to meet the demands of the new season.
“To that end, we have already embarked upon the process which will lead to the appointment of a new manager. We will update when appropriate and until such time as we can make an announcement there will be no further comment from the club on this matter.”
Houllier has hinted he may eventually return to football.
He said: “I am extremely disappointed that I will not have the opportunity to manage Aston Villa next season.
“My health has improved considerably since I was taken ill on April 20. I now intend to take the next few months to concentrate on recuperating fully before I may return to football.
“I was very much looking forward to the prospect of my first full season as Villa manager and returning for pre-season training to prepare for the campaign ahead, a luxury that I did not have last season.
“I have been extremely touched by all of the messages I have received and by the reaction of people throughout the world of football.
“I would especially like to thank my assistant manager, Gary McAllister, my staff, the players and all at Aston Villa for their support and, of course, for their efforts in securing a very positive end to last season.
“It has been an honour to manage this great club and I wish everyone connected with Aston Villa every success for the future.”