The club confirmed the announcement at a press conference today and insisted they had not sacked him but it was a 'mutual parting of the ways'.

However Merrick did not appear at the press conference.

Merrick has been with the club since its inception and won the grand final in 2006/7 and 2008/9, and narrowly missed out on the title again last season in a thrilling grand final nail-biter.

But this season Victory have struggled, ending the season in fifth place and going out in the first knockout round of the finals series.

They also lost 4-1 to arch rivals Adelaide United, to end a 10 game winning streak against the Reds, and then got thrashed 5-1 by Gamba Osaka in their opening Asian Champions League game.

However the Melbourne Victory board insist the decision to axe Merrick - on the eve of the A-League grand final - was not taken on the basis of any one result and came after a two month review.

"This decision has been reached after an extensive board review of all parts of the business," said chairman Anthony di Pietro.

"It was determined to part ways and for Melbourne Victory to undertake a new coaching direction.

"Our club has extremely high standards and we're disappointed by the results in this A-League season along with the start to our AFC Champions League campaign.

"Our intent is to continue to be the best run club in the A-League and be successful in Asia and believe this decision will assist us in taking us to that level."

Brisbane Roar coach Ange Postecoglou had been linked with Merrick's job but it is understood the FFA will keep Postecoglou in Queensland with a new contract when they take control of the club after the grand final.

Now Victory are to search the world for Merrick replacement, with current youth team coach Mehmet Durakovic taking charge in a caretaker role in the interim for ther rest of the ACL campaign.

"The club will now embark on a national and international search for a new head coach," said di Pietro.

"We are undergoing some very important changes at our football club. We have a new leadership and a clear vision moving forward.

"This is 1) Grow our brand domestically and internationally, 2) to drive our revenues and ensure the club's sustainability, and 3) ensure we are always highly competitive on the field.

"We believe today's agreement along with some very exciting player signings will assist us in achieving our objectives."

He added: "Ernie's been a very successful coach and we're appreciative of that, but it's time to part ways. The details of that will remain confidential and we left on definitely amicable terms.

"It's time for some new energy and it's time for a new opportunity for Melbourne Victory.

"We expect to be highly competitive through the whole season, and we expect success in Asian and to be highly competitive in Asia.

"That will be our expectation of our new coach. We will expect him to deliver a highly competitive team on the field.

"We will have an expectation to finish in the top four. We go out to win the Championship every year.

"We want to qualify for Asia if posdsible every year and get into the group stage of Asia and that's what we will expect to work towards with our new coach."

He insisted the club had not written off this year's Asian Champions League campaign but said the timing came after the review had been conducted and talks held with Merrick and his coaching staff.

"Once you've agreed on the way forward, there's no need to wait," he said. "It's time to move. If there's a chance to move forward, you move forward immediately.

"This has been part of a review of the whole business. It's not been a review of just one ACL game or did we lose one final.

"It's about the whole direction moving forwards."