Hearts boss Paulo Sergio will exit the club this summer after the manager rejected the offer of a new contract.
Sergio and Hearts confirmed this evening that talks over a new deal had broken down. The Portuguese took over as manager of the Scottish Premier League side in 2011.
A Hearts statement read: "Heart of Midlothian FC today announces that it has started the search for a new manager after Paulo Sergio did not agree to the terms proposed to him by the club.
"The club had been hopeful recent negotiations with Sergio would have a successful conclusion but he has opted not to extend his stay at Tynecastle.
"The club has now commenced the process of putting a new coaching team in place which is capable of building on the success of the William Hill Scottish Cup victory over Hibs."
Sergio took up the reins at Tynecastle last August and last month led the team to Scottish Cup glory, beating Edinburgh rivals Hibernian 5-1 at Hampden. First-team coach Gary Locke will stay at the club and be part of the new coaching set-up.
Sergio expressed his sadness at departing the club, and admitted he had no idea what his next career move would be.
"I deeply regret I will not continue my work at Hearts," he told the club's official website. "I appreciate the road the club is now going down and respect what our board is doing. But I cannot accept the offer the club has made me.
"I want to say many thanks to everybody who worked with us, including our board, and special thanks to our supporters. I wish the very best to this great football club and I am now just one more Hearts supporter.
"I would also like to say thank you to all the players, who will be friends for life. And as for my future? Only God knows."
Hearts assured supporters they had done everything possible to keep the former Sporting Lisbon boss on board "in the circumstances".
A club spokesperson said: "Paulo Sergio declined the offer of a new contract. We wanted to keep Paulo Sergio at Hearts and made what we believed was our best offer in the circumstances. The same terms will be available to other candidates willing to lead Hearts to new victories.
"We would like to put on record our appreciation of all his efforts, and those of Alberto Cabral and Sergio Cruz, in bringing the Scottish Cup back to Tynecastle. The search is already under way to find a new manager and we hope to make an announcement as soon as possible."