Gattuso revealed to Italian publication La Repubblica earlier in the day that he would be resigning from his post after a frustrating campaign.
Having slumped out of the Europa League in the group stages, Milan narrowly missed out on securing Champions League qualification in Serie A.
Club great Gattuso, a two-time Serie A and Champions League winner as a player with Milan, has decided to move on, the Rossoneri confirming both parties came to a mutual agreement.
Milan CEO Ivan Gazidis said: "I have had the privilege to get to know Rino Gattuso over the past six months since my arrival at the club.
"Rino has given everything to our efforts this season, and has worked tirelessly, always taking full responsibility, putting the club above every other consideration. I want to say from the bottom of our hearts, thank you Rino".
Gattuso ended his tenure, which started in November 2017, with a 3-2 win over SPAL on the final day of the Serie A season.
Lazio manager Simone Inzaghi and Sampdoria boss Marco Giampaolo are two of the favourites to take over.
Sporting director Leonardo is also leaving San Siro, with reports circulating he is set to return to Paris Saint-Germain.
Milan accepted its former coach's resignation after one season in his current position.