The 41-year-old, who signed a three-year contract to replace Oscar Garcia in June, won only three of his 22 league matches as Brighton slipped into the bottom three with 19 points from 22 matches.
"Sami offered his resignation and we reluctantly accepted earlier today," said chairman Tony Bloom on the club's website (www.seagulls.co.uk).
"Despite some good performances ... results haven't gone as well as we all had hoped and expected. We are all very disappointed but we respect Sami's decision and we all wish him well for the future."
Hyypia spent 10 years at Liverpool and won the Champions League, UEFA Cup, two FA Cups and two League Cups during his time at Anfield.
The Finn was sacked as manager of Bayer Leverkusen in April, the Bundesliga club he joined in 2009 as a player after leaving Liverpool.
(Reporting by Michael Hann, editing by Tony Jimenez)
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