The Finn's departure was tipped throughout the season but he looked to have bought some time with a strong end to the campaign.

Now however a disagreement over the playing budget for 2009/10 has led to a parting of the ways.

"I have thoroughly enjoyed my time as manager," said a statement from Paatelainen on the official club website.

"We have travelled a journey together and the club will always hold a special place in my heart.

"However, there comes a time when a change of direction is best for both parties."

Falkirk manager John Hughes, like Paatelainen a former Hibs player, is the early front-runner for the job.