Santos, 68, took charge in 2014 and guided Portugal to their first-ever senior international title when beating France in the final of Euro 2016.
The Portuguese Football Federation (FPF) announced that Fernando Santos, Portugal's coach, had resigned after his side was eliminated from the FIFA World Cup 2022 in Qatar.
Cristiano Ronaldo, Portugal's all-time leading scorer, started on the bench and entered the game as a substitute in the second half of the team's 0-1 quarterfinal loss to Morocco.
In his parting video message, Santos said that fulfilling his "life goal" of coaching Portugal had been a "dream come true."
"When you lead groups, you have to make some difficult decisions," Santos added. "It is normal that not everyone was happy with the choices I made but the decisions I took were always thinking about what would be best for our team."
The Portuguese Football Federation (FPF) in a statement said that both parties decided to end the contract as it was the "right moment to start a new cycle".
Santos took over as Portugal coach in 2014 and coached the squad in 109 games despite criticism of his tactics. Portugal won the inaugural UEFA Nations League in 2018–19 and the 2016 European Championship under his leadership.
"In addition to the titles won, Fernando Santos became the coach with the most games and most victories," FPF said.
"It was an honour to have a coach and a person like Fernando Santos as the head of the national team," it added.
FPF said that the selection of a new coach would now be kicked off by the board.
The names of AS Roma manager Jose Mourinho, Portugal Under-21 coach Rui Jorge, and Lille manager Paulo Fonseca have reportedly been mentioned in Portuguese media as possible replacements for Santos.
Mourinho landed earlier on Thursday in southern Portugal, where AS Roma will play three friendlies, but he chose to remain silent when asked about Santos' replacement by media.
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