Prandelli returned to the Florence-based club in November to replace Giuseppe Iachini after an underwhelming start to the season but things have barely improved under the former Italy manager.
Fiorentina were 12th on the Serie A table when Prandelli was appointed but they have now dropped to 14th position, seven points above the relegation zone.
“ACF Fiorentina can confirm that Cesare Prandelli has resigned as Fiorentina coach,” the club wrote in a statement.
“Prandelli offered his resignation on Tuesday and – with great sadness – the club has accepted his decision, acknowledging that the reasons behind this go beyond football.
“Over the past few months, Prandelli has given everything as coach, showing once again the deep bond that links him to Fiorentina and the city of Florence.
“President Rocco Commisso, the senior management, the squad and all the Fiorentina fans would like to thank Prandelli and wish him the best of luck in his future endeavours, both personally and professionally.”
Prandelli was previously in charge of Fiorentina between 2005 and 2010, helping guide the club into the Champions League twice and also reach the semi-finals of the UEFA Cup.
He left to take charge of the Italian national team after the 2010 World Cup and guided the Azurri to the final of EURO 2012, losing to Spain. The 63-year-old has also had spells in charge of Turkish giants Galatasaray, Valencia and Genoa.
"In recent months, a shadow has grown inside me that has also changed my way of seeing things," Prandelli said in a letter posted on the club's website.
"I came here to give 100 percent, but as soon as I had the feeling that this was no longer possible, for the good of all I decided to take my step back.
"I am aware that my coaching career can end here, but I have no regrets and I don't want to have any."
