Francona and Red Sox ownership met early Friday with General Manager Theo Epstein saying there were no immediate plans for an announcement.
However, by late afternoon the team said the Red Sox were going to make a change.
The team statement said: "Tito (Francona) said that after eight years here he was frustrated by his difficulty making an impact with the players, that a different voice was needed, and that it was time for him to move on. After taking time to reflect on Tito's sentiments, we agreed that it was best for the Red Sox not to exercise the option years on his contract."
The Red Sox had until Oct. 8 to exercise the option, with a reported $4.25 million, on Francona's contract for 2012.
Francona took over as the manager in Boston for the 2004 season. Over eight seasons the team was 744-552. The Red Sox won the World Series in 2004 -- their first world championship in 86 years -- and again in 2007. They also made the playoffs in 2005 and 2008.
In 2011, Boston led Tampa Bay by nine games for the final American League playoff spot but went 7-20 over the last month and was eliminated Wednesday, the final day of the regular season.
Scarlett Johansson steps out with fiance after pregnancy reveal
Interpol investigating stolen passports on missing flight