Lambert is believed to have parted company with the second tier side following a dispute with Wolves’ Chinese owners over who would have the final say on new signings.
The 47-year-old Scot is the third manager, following Kenny Jackett and Walter Zenga, to have left Molineux since Fosun bought the club last July.
“Wolves and Paul Lambert have agreed to part company following a football review which took place at the end of the season,” a statement on Wolves’ website read.
“The club would like to place on record its thanks to Paul for his dedication and professionalism during his time at the club, which included some memorable victories, and wish him all the best in his future career.”
Lambert took charge in November but was unable to mount a promotion challenge as Wolves finished 15th in the Championship, one place lower than the previous season.
A shock FA Cup win at Liverpool was the highlight of Lambert’s brief reign as issues with the club’s recruitment policy proved insurmountable.
Nuno Espirito Santo is believed to be the leading candidate to replace Lambert.
The 43-year-old former goalkeeper last week left his role as boss of Porto by mutual consent after failing to win a trophy with the Portuguese club this season.