The former Hornets player was appointed on an initial interim basis in March 2024, and was handed the job full time after losing only once of seven games.
But following a poor run of form in the second half of 2024/25, he becomes the 10th manager dismissed by the club in the last five years.
Watford were as little as four points off the play-offs at the end of March but one win from their final seven games saw them finish 11 points adrift.
Sporting director Gian Luca Nani told the club website: “The time has come for a change and to build on what we believe is a young and talented squad that will have benefitted from the experience of the Championship this season.”
Cleverley leaves as Watford’s longest-serving head coach since Javi Gracia – and is the first to last more than a season since the Spanish boss was dismissed in 2019.
Since Gino Pozzo took over the club in June 2012, the Hornets have been through 21 permanent managers in 13 years, including 15 who have lasted less than a full campaign.
