Former Toyota technical director Mike Gascoyne said his exit from the Formula One team had been agreed amicably.
Gascoyne's ability is highly regarded within F1
Gascoyne was suspended on Wednesday after a "fundamental difference of opinion with regard to the technical operations" of the team.
And the two parties have now agreed to part company immediately, although Gascoyne will be paid until November.
He said: "We have reached a crossroads in our relationship and it is the right time for us to part amicably."
Gascoyne said he would now be able to move back to the UK and spend more time with his family.
"It is the end of an era. I extend my thanks to all members of the team and wish them a successful future in Formula One," he added.
Gascoyne joined Toyota in late 2003 after successful spells with Jordan and Renault.
Until last weekend, Toyota's 2006 car had not lived up to expectations
Autosport magazine's website said Gascoyne would be replaced by Frenchman Pascal Vasselon, who joined Toyota from tyre supplier Michelin last year.
Toyota, who last year had their best ever performance of fourth in the world championship, have had a disappointing start to the season.
After several podium finishes in 2005, they were expecting to challenge for victories this season, but the car has struggled with a lack of grip.
However, after a poor first two races, Ralf Schumacher did finish third in Australia last weekend.
Team principal Tsutomu Tomita said: "Although we have reached a joint decision to go our separate ways, I wish to extend my sincerest gratitude to Mike for the indisputable contribution he has made to our team over the last few years.
1989-1991: McLaren (aerodynamicist)
1991-94: Sauber (head of aerodynamics)
1994-98: Tyrrell (deputy technical director)
1998-2000: Jordan (technical director)
2001-03: Renault (technical director)
2003-06: Toyota (technical director chassis)
"This separation should in no way undermine the work he has done, nor reflect his technical expertise. We all wish him well for the future."
Gascoyne has a strong reputation within F1 after turning around the fortunes of Renault and the now-defunct Jordan team.
But he is renowned for his strong character and confident manner, and is resolute about the way in which he wants his teams to work.
It has been speculated that his approach has led to frictions with the more conservative management style of Toyota, which is poised this year to become the world's biggest road-car maker.
Gascoyne turned Jordan into winners after joining them in 1998, and the team were title contenders the following year.
He joined Renault when they were struggling badly in their former guise as Benetton in 2000, and by 2003 they, too, had become winners again.
Toyota employed him, on a salary reputed to be $6.5m (£3.7m), to perform a similar transformation for them.
They have reputedly the biggest budget in F1, but have not won a race since entering the sport in 2001.
The first car designed under Gascoyne, last year's TF105, was the most competitive the team had produced.
Gascoyne's contract was due to expire this year, and he has previously said he was not enjoying the amount of time he had to spend away from his family in England while working at Toyota F1's Cologne headquarters.