The veteran former England boss, who had been under pressure due to the club’s poor form, was hospitalised after falling ill during a training session on Thursday amid reports he was to be sacked.
Palace have lost 10 of their past 16 league games and are 16th in the table, just five points above third-bottom Everton.
“I understand, given recent circumstances, it may be prudent at this time for the club to plan ahead, and therefore I have taken the decision to step aside so that the club can bring forward their plans for a new manager, as intended for this summer,” said Hodgson, 76.
Hodgson’s assistants, Paddy McCarthy and Ray Lewington, are set to take charge of the team for the Everton match.
Former Eintracht Frankfurt boss Oliver Glasner, who led the German club to Europa League glory in 2022, is the favourite to replace Hodgson on a permanent basis.
Hodgson’s final match as Palace boss was a 3-1 home defeat against Chelsea on February 12, a loss that came after a 4-1 embarrassment at arch-rivals Brighton.
The former Liverpool and Inter Milan boss returned for his second spell with Palace in March last year after previously managing the south London club from 2017 to 2021.
He signed a short-term deal to take over from Patrick Vieira, steering them away from relegation trouble and securing an 11th-place finish.
• ’Special place in Palace history’ –
Hodgson, who was born near the club’s Selhurst Park stadium and who was on their books as a teenager, also saved Palace from relegation in his first season in charge in 2017/18.
He surpassed Bobby Robson to become the oldest manager in Premier League history aged 71 years and 198 days during the following campaign.
“This club is very special and means so much to me and has played a big part in my footballing life,” said Hodgson, who is now out of hospital.
“I would like to thank Steve Parish and his American partners for their support. My thanks and respect also to the current squad of players who have been a pleasure to work with.
“I am confident that the season will finish well and I wish the team every success in the weeks, months and seasons to come.”
Hodgson’s largely successful reign turned sour this season, with fans criticising his dour football and handling of star winger Michael Olise, who limped off just 11 minutes after coming on as a substitute on his return from injury against Brighton.
Palace chairman Steve Parish said Hodgson should be respected for retaining the club’s top-flight status.
“Roy has a special place in Crystal Palace history and this will never be forgotten,” he said.
“After four years in which he led the club to maintaining Premier League status season after season, he once again joined us nearly a year ago to steady the ship, and worked wonders.
“That he then agreed to continue in the summer speaks volumes about his commitment to our club. Quite simply, we owe our continued Premier League status to Roy.
“I would like to thank Roy enormously for his service and wish him the very best for the future. It’s fair to say Roy has the keys to Selhurst Park and will always be welcomed back.”
AFP