Munoz became the first managerial casualty of the 2021/2022 Premier League season after just seven games.
The Hornets have so far accumulated seven points from their opening seven games and are 14th on the league table.
Munoz took over from Vladimir Ivic in December 2020 when Watford were in the championship and secured promotion to the Premier League by finishing second in the second tier.
"It's been a wonderful journey and it concluded in a way that I neither expected nor wished for,” Munoz posted on Twitter.
"I'm grateful and I will only remember all the good things I have experienced.
"It's a sad day for me and my family because it marks the end of a period at a club and in a city where we have felt at home.
"I've got nothing but words of gratitude for the club that gave me the opportunity to start my first adventure in this exciting country.
"My heartfelt thanks to the players to put blind faith and believing in me and my staff from the first moment so that together we could achieve the dream of promotion to the Premier League.
"And many thanks to all the members of the club who don't appear on the photos, because they are essential for the proper functioning of this team. You made my life so much easier.
"Finally, I would like to make a special shout out to the fans. It's only been a year, but I will never forget its intensity and the treatment you have always given me over the year. I will always be a Watford FC fan."
Former Chelsea and Leicester City manager Claudio Ranieri has been tipped to become the new Watford boss.
