Sherwood took charge of Spurs in December last year on an 18-month deal following the departure of Andre Villas-Boas although his future has been under scrutiny for some time
Despite leading the north London club to a sixth-place finish in the Barclays Premier League, ensuring qualification for the Europa League next season, it has been decided the 45-year-old will not continue in his role.
"We appointed Tim mid-season as someone who knew both the players and the club," said chairman Daniel Levy in a statement on the club's official website.
"We agreed an 18-month contract with a break clause at the end of the season and we have now exercised that option."
Sherwood has long been battling against suggestions he would be relieved of his duties at the end of the season - with names such as Louis van Gaal, Frank de Boer and Mauricio Pochettino consistently linked to the post.
Having worked with the club's younger players, Sherwood has stated many times that he would never wish to return to his developmental role with Spurs.
When asked in his press conference ahead of their final game of the season against Aston Villa he revealed he was not confident he would be managing anywhere next year.
During his spell in charge Sherwood compared his position to that of a babysitter and a supply teacher but did guide the club to victories over Manchester United at Old Trafford, ending the season with a win percentage of 59 per cent.
The club's statement went on to suggest a new head coach is not yet in place.
"Moving forward, now the season is over, we shall embark on the process of finding a new head coach," it continued.
"We have a talented squad and exciting young players coming through
We need to build on this season, develop our potential and inspire the kind of performances that we associate with our great club."
Source : PA
Source: PA