McClaren and wife Kathryn leave the venue of the news conference

Assistant coach Terry Venables has also lost his job in what the Football Association said was a unanimous decision by its board.

The FA brought a swift end to McClaren's 18-match reign as England's head coach at an emergency meeting.

McClaren's position had become untenable after the 3-2 defeat to Croatia at Wembley on Wednesday.

McClaren said at a news conference on Thursday that losing the England manager's job was "the saddest day in my career".

"Eighteen months ago [when I was appointed] was the proudest day of my career and I was honoured to be the England head coach and for 18 months I've enjoyed every minute.

606: DEBATE

"It is a sad day to have been relieved of my duties but I understand the decision of the FA.

"I have huge disappointment for the nation and fans. But I will learn from my failure," added McClaren.

His failure to qualify for Euro 2008 cost him his job, said FA chief executive Brian Barwick.

"I spoke to Steve this morning - we get on very well with him. I've had many grown-up conversations and had another one with him this morning - and I can only wish him well. But in the end, not qualifying for Euro 2008 comes up short," said Barwick.

McClaren's reign was the shortest tenure of any England coach.

FA chairman Geoff Thompson said: "Like every England fan, we are all bitterly disappointed that we have failed to qualify for Euro 2008, and I know Steve feels that disappointment more than anyone.

"Of course we have no divine right to play in major tournaments, but it is quite right that qualification is expected.

"I would like to thank Steve for the work he has done since taking on the position last summer. His commitment to the job could not be questioned and I wish him the best for the future.

"The recruitment process for the new coach begins now and we will do everything to get the right man for the job."

McClaren, 46, who had a four-year deal, is expected to be paid more than £2m in compensation and ex-Chelsea boss Jose Mourinho and Martin O'Neill were the bookies' early favourites to succeed him.

However, former Real Madrid coach Fabio Capello was first to declare an interest in the job.

We have let the fans down, and I apologise for that

FA chief executive Brian Barwick

BBC football correspondent Jonathan Legard said: "There will be plenty of pressure within the media to have Martin O'Neill but the FA may feel that is a backwards step - he wasn't good enough when McClaren was appointed, so is he the one to take England forward now?"

The FA has plenty of time to search for a replacement with the next scheduled fixture a friendly in France at the end of March.

Barwick confirmed that nationality would not be an issue as he leads the search to find McClaren's successor.

He also admitted that errors were made in the selection process when McClaren was appointed in May 2006.

"The recruitment process for the new coach begins now and we will do everything to get the right man for the job," said Barwick.

"It will be done differently. We've got to learn lessons from the way we did it."

"Qualification for a major tournament is probably a minimum requirement."

Barwick also said he did not regret giving McClaren a four-year contract.

"The contract is a private contract. I don't regret that now; I think he has tried very hard."

FA board director and Premier League chairman Sir Dave Richards defended Barwick, saying: "Brian has taken a lot of stick about him being the sole person to appoint McClaren.

"This responsibility has to be shared among us all. It's unfair to say he was Brian's man - he was the FA's man."

On the issue of the number of overseas players in the top flight, Richards added: "You would know as well as anybody that the Premier League is the best in the world, because it has the best stars in the world.

"There are also rules in the European Union that allow players to come, and clubs will pick the best stars."

The financial loss to the FA of not qualifying is less than £5m

FA chief executive Brian Barwick

Barwick said he felt embarrassed and disappointed about the situation.

"I'd like to apologise to the fans personally.

"I care about this passionately, it has never been just a job. I'm in it because I care about football, football fans and football teams.

"Last night was a tough, tough night. We care about this very much. I understand we have let them down and apologise for that."

Former Middlesbrough boss McClaren admitted before the Croatia match that he would "take responsibility" if England failed to reach the European Championship finals in Austria and Switzerland.

The FA took action to dismiss McClaren ahead of the 2010 World Cup qualifying draw in Durban, South Africa, on Sunday.

England's failure to reach a major tournament for the first time since the 1994 World Cup finals will cost the FA no more than £5m in lost revenues, said Barwick.

Thompson promised the FA would conduct a "root-and-branch" review of the England team set-up, and that would be led by chief executive Brian Barwick with immediate effect.