Gracia lasted just over three months in his second spell at Vicarage Road, and told owner Gino Pozzo he wanted to leave after yesterday’s 2-0 home defeat to Swansea City.
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A club statement said: “The club is sad and disappointed to confirm the resignation of Javi Gracia as Head Coach.
“We retain the belief Javi was the right man to lead the club towards its push for promotion, but Javi felt he no longer had the motivation and was not the right man to continue coaching this exciting group of young players.
“We respect his decision and accept his wish to leave Vicarage Road with immediate effect.
Gracia departs with Watford in tenth spot in the Championship (Image: Bradley Collyer/PA)
“Charlie Daniels, Dan Gosling and Adrian Mariappa will take charge of the team against Hull City on Tuesday night. We remain well placed in the Championship, four points off the play-offs with a game in hand and 17 matches remaining.
“Everybody at the club believes wholeheartedly this is a squad capable of challenging for promotion.
“We would like to thank Javi and his team for their work during two spells at the club. We wish him and his family the best and they will always receive the warmest of welcomes at Watford.”
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The Hornets are winless in their last four games, with Gracia saying after yesterday’s defeat that he was unhappy with the state of the team and suggesting he was not pleased with a lack of activity in the January transfer window.
Ipswich Town travel to Watford later this month, squaring off with the Hornets on Tuesday, February 24th (7.45pm).