Dalglish was appointed to the Liverpool post mid-season last year following the disastrous tenure of Roy Hodgson and was responsible for steadying Liverpool's decline down the league.
However, he spent huge money over the summer on rebuilding a squad with young British players and many feel that he paid over the odds for a lot of the players he obtained--including a combined £71 million on Jordan Henderson, Andy Carroll and Stewart Downing.
Liverpool did win the Carling Cup this season, their first silverware in six years, but their league form was well below the standard expected from a Liverpool team with the side eventually finishing in 8th position.
Many felt this poor league performance was directly attributable to Dalglish's under-performing signings and a deficient level of tactical savvy.
Others however were of the view that the signings were not the fault of Dalglish but rather that of the also recently departed Damien Comoli.
Whether either is true or the truth lies in some combination of both, it is a simple fact that despite the Carling Cup success and a strong FA cup run, Liverpool were simply too poor on multiple occasions this season.
This has not escaped the attention of the new ownership who have, by making this move, demonstrated that not only are they willing to spend, but that they expect to win.
While it may indicate turmoil in the short term, long term it is good to know that this is the owner's mentality.
Many though will feel that Dalglish ought to have been given more time. Given his stature as a living legend of Liverpool football, today is a sad day for all Liverpool fans who will not have wanted to see things come to this.
Roberto Martinez, Brendan Rodgers, Andre Villas-Boas and Rafa Benitez have been mooted as potential successors to Dalglish's now vacant throne.
What do you think of the decision and who would you like to see hired to replace Kenny?