The 50-year-old had been in charge of the national side since November 2011 but had struggled to meet the growing expectations of the federation and Turkey supporters.
Turkey sit in fourth place in Group D of UEFA World Cup qualifying with just two wins from their opening six matches, four points behind second-place Hungary and 11 points behind leaders Netherlands.
With their chances of reaching Brazil in 2014 all but over, both parties have now agreed that Avci will step down.
A statement on the Turkish Football Federation's website read: "Abdullah Avci is leaving the national team after reciprocal talks and an agreement was reached. We thank Mr Avci for his services."
The coach also confirmed the move, insisting that it was the best outcome for everyone.
"Just like winning and losing, parting ways is also a part of football," he told the Hurriyet Daily News. "I consider that quitting my post is the right decision."
Turkey face Andorra in their next qualifying match on September 6, before a trip to Romania four days later.
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