Merrick told players of his decision after Sunday’s 2-0 loss to Adelaide United.
Wellington sit last on the ladder with two wins and six losses from their eight games this season and Merrick said he’d taken the team as far as he could.
“I take full responsibility for position the team is currently in,” he said.
“I feel that I have not performed well enough as head coach, as we have a very strong squad that should be higher up the table.”
With a run of home games looming, beginning on Saturday against Central Coast Mariners in Hamilton, Merrick said the time was right for him to step aside.
“I think this will give my successor the best opportunity to take the team forward,” he said.
Merrick, who led Melbourne Victory to A-League titles in 2007 and 2009, took over from Ricki Herbert in May 2013 after the Phoenix had slumped to last place in the previous season.
His initial two-year contract was renewed in March 2015 for another three years.
Wellington Phoenix said in a statement that Merrick, 63, had been a “consummate professional” throughout his time at the club.
The club said it would now begin the process of appointing a new coach, and would make no further immediate comment.
The team are travelling back from Adelaide, and not expected in Wellington until late on Monday night.
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