The team announced that Manuel has been replaced on an interim basis by third-base coach Ryne Sandberg effective with Friday night's game against the Dodgers.
General Manager Rueben Amaro said the team has asked Charlie to stay in an advisory role.
"I would like to thank everyone in the Phillies organization for this chance, for staying with me," Manuel said at a news conference on Friday afternoon.
Also during the news conference, Manuel said he had a "few more years" left of managing, but it all depends on if someone wants him.
He also made it clear he did not resign and did not quit when he was told his contract would not be renewed for next year.
Still, Manuel did not show signs of bitterness toward the team.
"I want the Phillies to be the best team in baseball and I want them to win more World Series," Manuel said.
Amaro was emotional during the announcement, in tears while he said "Making this change is not easy for me."
With Sandberg replacing Manuel for the remainder of the 2013 season, Juan Samuel will assume third base coaching duties and Wally Joyner will become the first base coach.
The news comes just days after Manuel hit a career milestone. On Monday, Cole Hamels helped the team deliver a win over the Atlanta Braves, the 1,000th win of Manuel's career.
He became the 59th manager in major league history to notch 1,000 wins.
Manuel had already sealed his legacy as the winningest manager in 130 years of Phillies baseball.
He was named the 51st manager of the Phillies on November 4, 2004.
Manuel guided the Phillies to the 2008 World Championship with a victory over the Tampa Bay Rays, the second title in franchise history and the first since 1980.
Manuel also led the team to a National League championship in 2009, but the team fell to the New York Yankees in the World Series.
According to his biography on Phillies.com, Manuel is one of only two managers in NL history, along with ATL's Bobby Cox, to win 5 straight division titles since divisional play began in 1969.
He is the only manager in Phillies history to lead the team to 5 straight division championships (2007-11).
Prior to being hired as manager, served as special assistant to General Manager Ed Wade from 2003 to 2004.
The Phillies have lost 19 of 24 since last month's All-Star break and are 20½ games out of first in the NL East.