The Dutchman has been relieved of his duties with immediate effect following their failure to qualify for Euro 2012
The Dutchman was appointed in August 2010 with the aim of qualifying for Euro 2012, but he failed in his objective as Croatia proved to be too much of an obstacle in the play-offs by winning 3-0 on aggregate.
"After negotiations between Guus Hiddink and the Turkish Football Federation's board of directors, an agreement has been reached to terminate Guus Hiddink's contract by mutual consent," a statement on the official TFF website reads.
"We would like to thank Guus Hiddink for his work with Turkey and wish him all the best for the future."
The 65-year-old previously coached national sides including the Netherlands, South Korea, Australia and Russia.