The Brazilian has led his charges to the final round of World Cup qualifying, but has overall shown mixed results with wins from just half of his results
The former Brazilian captain lasted just over a year in the position, winning eight out of 19 matches at the helm of the Lions of Mesopotamia.
"I would like to announce via this website that at noon on Tuesday I sent a communication to FIFA and to the Iraq Football Association declaring that I consider my contract to be void due to the IFA's failure to honour the terms of my contract," Zico wrote on his official Twitter account. "I will provide further details shortly."
Rumours of Zico's departure have spread since earlier this fall, with some reports going so far as to say that he was to resign in September. He has previously managed Japan's national team as well
Iraq are currently in third place in Asia's Group B with five points from five matches, trailing leaders Japan and second-place Australia. They lead Oman, who have also five points, on goal difference, and Jordan who hold just four points.
The top two countries from Groups A and B will automatically advance to Brazil, while the third-place teams from each group advance to a play-off that concludes with Asia's fifth-place team playing their South American equivalent for the right to participate in the finals.
The IFA has yet to announce an interim manager for their campaign in the West Asian Football Federation Championship, which takes place next month in Kuwait. Iraq are grouped with Jordan and Syria in Group C.