The Brazil legend has led his charges to the final round of World Cup qualifying, but has endured mixed fortunes after picking up wins from just half of his games
The former Brazil 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 in recent weeks, with some reports linking him with a departure as far back as September.
Iraq are currently in third place in Asia's Group B with five points from five matches, trailing leaders Japan and second placed 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 teams in third place 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.