The Shots had high hopes for season after last year reaching the play-offs but endured a wretched time.
The will play in the National League South next season and will do it under a new manager.
Waddock leaves his role as the club begin the search for his replacement.
“Aldershot Town Football Club announces that Gary Waddock has left his position as First Team Manager with immediate effect following the mutual termination of his contract,” a statement read.
“Gary rejoined the club in June 2016 and helped deliver two very successful Play-Off seasons in his second stint in charge.
“In his first stint in charge he won the Conference in his first season, taking the club back to the Football League.”
Shots chairman Shahid Azeem said: “Gary has delivered in not only winning the National League in 2008, but in his last three years he has delivered two play-offs and leaves us with sincere appreciation, we wish him all the best for the future.
“On a personal note, Gary along with his family have become friends and will always be welcome at the club.”