The 41-year-old, who is part of the England coaching set-up, was given his first managerial job in December.
Valencia won three of their 16 league games under the former television pundit, and 10 of 28 games overall.
Neville said he wanted to stay but results had "not been to my standards" or those "required by this club".
He added that he understood "we are in a results business".
Neville's younger brother Phil is also part of the Valencia coaching team and will be retained.
Neville first faced calls to quit after a 7-0 loss to Barcelona in the Copa del Rey semi-final first leg in February
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