Hierro was hastily ushered into the position after the sacking of Julen Lopetegui just days before the competition began, which followed the announcement that his predecessor would take up a role with Real Madrid at the end of the tournament.
Once in the knockout phase, they held the upper hand on Russia but were ultimately eliminated after penalties, which was enough to convince Hierro that the role is not for him.
In a statement, the RFEF said: "After many kilometres of walking together, the Royal Spanish Football Federation and Fernando Hierro put an end to their relationship once the participation of Spain in the World Cup in Russia ended. The coach declined to return to his previous position as sports director of the RFEF to seek new horizons and undertake new professional challenges.
"After two spells as sporting director of the Federation, the first between 2007 and 2011 - coinciding with the best period of the national team, which won the 2008 European Championship with Luis Aragones as coach and the 2010 World Cup with Vicente del Bosque - and the second from November 2017 until now, the RFEF wants to thank Fernando Hierro for his commitment and sense of responsibility when he took the lead in the national team in this extraordinary situation, as well as in the performance of all his duties.
"The Federation wants to highlight the professional and human values of an extraordinary athlete who wants the best of fortunes.
"Thanks for everything, Fernando!"
The coach had previously intimated that he would stand down following the exit, which generated criticism of his methods. Barcelona midfielder Ivan Rakitic, for example, admitted that he "thought he was playing a different sport" when he saw Andres Iniesta left out of Spain's side to face Russia.
Meanwhile, goalkeeper David de Gea admitted after the competition that Spain were "f*cked".
Hierro enjoyed a storied playing career that was primarily spent with Real Madrid, where he spent 14 years, having previously turned out for Valladolid. He won five La Liga crowns and three Champions Leagues with the Bernabeu side before completing his playing days at Al Rayyan and Bolton.
Previously, he had been head coach of Oviedo in Spain's second tier.