Valverde spent two-and-a-half seasons at the Camp Nou after joining from Athletic Bilbao, winning two La Liga titles, one Copa del Rey and the 2018 Spanish Super Cup.
Barcelona however faltered in the semi-finals of the UEFA Champions League in each of Valverde’s two seasons despite boasting favorable first leg leads.
Valverde’s position came under increased scrutiny after the Nou Camp outfit lost 3-2 to Atletico Madrid in the Spanish Super Cup semi-final in Saudi Arabia last Thursday.
The 55-year-old, who still had six months remaining on his contract, becomes the first manager to be sacked mid-season by Barcelona since Louis Van Gaal in January 2003.
"FC Barcelona and Ernesto Valverde have reached an agreement to terminate the contract that united both parties," the statement announcing Valverde's departure read.
"The club publicly expresses its gratitude to Ernesto Valverde for his professionalism, his commitment, his dedication and his always positive treatment towards all that make up the Barca family. We wish him luck and success in the future."
Former Betis manager Setien has signed and two-and-a-half-year contract and will be presented to the media later on Tuesday.
Setien led Betis to sixth place in the 2017/2018 campaign, their highest finish since 2005, qualifying for the Europa League in the process but was sacked at the end of last season.
Barcelona are level on points with Real Madrid at the top of the Spanish La Liga table and have a UEFA Champions League round of 16 tie to negotiate with Napoli next month.
