Pulis, 56, met with chairman Steve Parish on Thursday as tension between the pair came to a head.
The former Stoke boss, who won the Premier League's manager of the year award last season, had been frustrated by the failure to land a number of summer transfer targets.
Bookmakers' odds had tumbled on Thursday as speculation over the Welshman's job intensified.
Malky Mackay and David Moyes were suggested as potential candidates to replace Pulis by former Palace defender Matt Lawrence, speaking on BBC Radio 5 Live.
The remainder of his coaching staff - including Gerry Francis and Dave Kemp - have been asked by Parish to stay on for the trip to Arsenal before leaving the club.
Pulis wanted to assume greater control of all football matters at Selhurst Park, especially transfers, after missing out on a number of key targets.
He and Parish also disagreed about their vision for the club.
Tony Pulis' clubs |
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1992-1994: AFC Bournemouth
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1995-1999: Gillingham
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1999-2000: Bristol City
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2000: Portsmouth
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2002-2005: Stoke City
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2005-2006: Plymouth
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2006-2013: Stoke City
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2013-2014: Crystal Palace
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The chairman and sporting director Iain Moody are in charge of delivering the potential signings earmarked by Pulis.
Moody arrived in November from Cardiff City, where he had held a similar role before being dismissed by the owner Vincent Tan.
Palace signed Liverpool full-back Martin Kelly on Thursday, while striker Fraizer Campbell arrived from Cardiff for £900,000 and former Fulham centre-back Brede Hangeland joined on a free.
Just hours before Pulis left, Kelly told theclub's official website: "I'm looking forward to playing under Tony and playing regular football again."
Hangeland also picked out Pulis as one of his reasons for moving to Selhurst Park, saying: "All the things I've heard about this club - the manager, players, staff - it's all been good."
Pulis left Stoke last year after seven years at the Britannia Stadium, having guided the Potteries outfit to the Premier League and kept them there, extending his record of never being relegated.
Palace were bottom of the table when he was named as Ian Holloway's replacement in November 2013.
Tony Pulis' Crystal Palace record |
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Games: 29
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Wins: 13
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Draws: 5
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Losses: 11
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Biggest win: 3-0, at Cardiff, April 2014.
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Biggest defeat: 3-0, at Newcastle, December 2013.
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Pulis managed to halt the decline, and a run of five successive victories from 29 March, starting with a 1-0 win over Chelsea , steered the Eagles to safety.
They famously came back from three goals down in the final 11 minutes against Liverpool to all but deny the Reds the title at the end of last season.
Their eventual 11th-placed finish was the club's highest since 1992.
Former Palace chairman Simon Jordan told Talksport that managers "have to do as they're told".
"Football managers are incredibly difficult people to deal with because they believe their own hype," Jordan said.
"I know what managers will do, they will put you to the sword. If you don't stand up and you don't manage your football club properly, they will run havoc in it and then they will disappear into the ether when it least suits you."
At the end of last season, Parish spoke to the South London Pressabout Pulis, saying: "He took a big chance coming to Crystal Palace on a verbal promise that I and the club would support him financially."
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