"I am writing this today with a very heavy heart and after a lot of consideration, to tell you that I have resigned from my head coach position," Zola, 47, wrote in a letter to fans published on the club's website (www.watfordfc.com) on Monday.
"This game does not wait and does not stop. There is always the next challenge and a new environment ahead which means nothing is ever the same."
Watford, controlled by the owners of Serie A team Udinese, lost the Championship playoff final to Crystal Palace at Wembley in May but are languishing in 13th place this term.
Former Parma and Chelsea forward Zola previously coached West Ham United in the Premier League and was also the assistant coach with Italy Under-21s.
"The board fully respects his decision and Gianfranco will be welcome at Watford Football Club at any time in the future," said the team from the north of London.
(Writing by Mark Meadows; editing by Tony Jimenez)
