The Argentine had been faced with the tough challenge of maintaining Barcelona's incredible recent record of success and while they remained in the title chase until the final game of the season, their performances drew criticism.
Victory in Saturday's final game at home to Atletico, would have drawn them level on 89 points with the Madrid side and seen them finish first with a superior head-to-head record.
In the end, however, they could only manage a 1-1 draw, which left them without major silverware for the first time in six years.
Barca also failed to reach the last four of the Champions League for the first time in seven years after being knocked out by Atletico in the quarter-finals.
"I would like to thank the club for putting their confidence in me and I am sorry that I was unable to deliver," Martino told a news conference.
"The team fought to the end with lots of dignity. I would like to congratulate Atletico they have done very well all through the season."
Martino’s task was made more difficult over the season with injuries to key attacking talents Lionel Messi and Neymar while defensive weaknesses were badly exposed.
Martino had said earlier in the campaign that it would be difficult for him as he was not from the Barcelona or closely-linked Dutch school of football and there were constant debates about his more direct style.
Former player Luis Enrique is the favourite to replace Martino, having resigned as Celta Vigo coach on Friday.
(Editing by Tony Davis)
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