Dalglish back in charge at Liverpool as Hodgson is shown the door
• Return of the King: Kenny Dalglish reprises his old job at the helm of Liverpool
He leaves with the club four points above the relegation zone in 12th place, having won just seven from 20 league games. Dalglish will be in charge today when Liverpool travel to arch-rivals Manchester United for an FA Cup third round match.
Liverpool's fans, long considered among the most loyal in the game, chanted for Hodgson's dismissal and swamped radio shows and internet forums with relentless tales of disenchantment and criticism of his selections and tactics.
The return of Dalglish, until the end of the season, will placate those fans but having been out of club management for a decade the appointment of a man who won eight league titles as a player and manager at the club will be seen by some as a desperate gamble.
Hodgson, named manager of the year last season after he helped Fulham reach the final of the Europa League, was told the news on Friday night.
"I have... found the last few months some of the most challenging of my career," he said on the club website. "I am very sad not to have been able to put my stamp on the squad, to be given the time to bring new players into the club in this transfer window and to have been able to be part of the rebuilding process at Liverpool."
Former Liverpool player and assistant manager Phil Thompson said that the fan pressure made Hodgson's position almost impossible.
"It's been extremely difficult times, especially since the Wolves game at Anfield," he said. "It's been very difficult for Roy to carry on. I've been there with Gerard Houllier at the end and it's not nice."
In a statement on the website club owner John Henry said: "Both parties thought it in the best interests of the club that he stand down."
But the League Manager's Association issued a statement saying that Hodgson had wanted to continue. "He has not walked away, he was happy to carry on but at 8pm last night he received the news from the owners no longer wanted him to continue," the statement said.
"It wasn't a surprise but it was disappointing and upsetting news," said Hodgson, who was involved in negotiations with the club over the terms of his departure until three o'clock yesterday morning. Looking ahead to Dalglish's arrival, Henry said: "Kenny was not just a legendary footballer, he was the third of our three most successful managers - three giants. We are extraordinarily fortunate and grateful that he has decided to step in during the middle of this season."
Dalglish was in charge when Liverpool claimed the last of their 18 English league championships in 1990. He left in 1991 and had spells at Blackburn, where he won the title again, Newcastle and Celtic.
He returned to Liverpool as a club ambassador in 2009 but has not managed a team since leaving Celtic in 2000.
q KING'S RETURN, PAGES 12-13