McGhee departs Molineux after a disappointing run of results, which has seen the Midlanders win two of their last 12 Division One games.

The Scot, who joined Wolves from Leicester in 1995, twice led the club to the play-offs and last season's FA Cup semi-final but he never managed to land the Holy Grail - a place in the Premier League.

Colin Lee, McGhee's assistant manager, takes temporary charge at Molineux and the club have not set a timetable on the appointment of a successor.

Wolves managing director John Richards said: "I spoke with Mark at Molineux yesterday (Wednesday) morning and other board members were contacted by phone.

"We all agreed that it would be in the interests of the club to make this joint decision. Mark fully understood the position and the meeting ended amicably."

Wolves won their first four Division One matches this season but have since hit a dramatic slump.

The club, currently 11th in the table, have won just two of their last 12 League games and have also gone out of the Worthington Cup to Bournemouth.

Speaking on Tuesday - before their 2-0 defeat to Ipswich - McGhee hinted he thought he may not still be at Wolves next season, but he anticipated no developments just yet.

"My contract expires at the end of the season and I do not expect anything to happen before then, either positively or negatively," he said.

"It will be a surprise if Wolves do anything in the interim in either direction.