The Spaniard was appointed in January succeeding Steve Clarke and steered the Baggies to safety, with the club finishing the season in 17th-place.
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A statement on their official website read: “West Bromwich Albion have parted company with Pepe Mel by mutual consent.
“Both parties have decided to go their separate ways following talks between the Board of Directors and the Head Coach today.”
Sporting and technical director Richard Garlick added: “We would like to thank Pepe for his efforts over the past four months in helping to keep the Club in the Premier League and wish him well for the future.
“Both Pepe and the Club set out with the best intentions of making the appointment work. However, having reflected on events both on and off the field during our talks today, it became apparent that it was in the best interests of both parties for there to be an amicable parting.
“We are grateful for the manner in which the existing coaching staff and players have rallied behind Pepe to get the Club over the line in what has proved an extremely competitive division.”
Garlick confirmed the search for a new manager has already begun, and claimed “lessons have been learned” from a “disappointing” season.
“Although we have managed to achieve a fifth successive season of Premier League football, it has been a very disappointing campaign and lessons have been learned,” he added.
“The search for a new Head Coach has now begun. We aim to find the most suitable candidate who, with the support of the structure we have had in place for six years and are presently strengthening, will enable the Club to be more competitive next season.”
Mel oversaw three wins from 17 games during his time in charge at the Hawthorns and had previously spoken of the uncertainty surrounding his future.