"The decision not to bring back Bob as the Mariners' manager was a difficult one," said Bill Bavasi, executive vice president and general manager of baseball operations.
"The players played hard through the final day of the season. Bob and his coaches worked hard to win while trying to develop young players during this season of transition."
The decision was announced one day after the team ended its 2004 season, losing 3-0 to the Texas Rangers.
"This decision is not meant to place blame completely on Bob," Bavasi said.
Melvin managed the Mariners for two seasons. They were 93-59 in 2003 and 63-99 this year.
The club also announced that members of the coaching staff were told that they are free to pursue other job possibilities.