Mazzarri also brought in midfielder Roberto Pereyra from Juventus for £11.2m - he made 13 appearances and scored twice but was also on the receiving end of a red card.
Marco Silva is among the nominees being discussed by Watford.
Watford have endured a hard season both on and off the pitch under Mazzarri.
And the trigger-happy Pozzo family have now decided that enough is enough. Had Hull remained in the top flight it would have cost rival clubs £3m to trigger the release clause in Silva's contract but their relegation means he is free to leave.
Walter Mazzarri was the master of his own future as he sought to leave Watford over ongoing communication issues, sources close to the club have revealed. However, a downturn in form that followed coupled with rumours of player unrest eventually cost the former Chelsea manager his job just nine months later.
His failure to speak English along his unconventional and strict training ground methods have raised eyebrows.
Ranieri's fellow Italian has had a tricky time in the Premier League on the whole, but has still managed to lead his side to safety despite a recent run of five straight defeats.
"We thank Walter and his staff for the contribution they have made to Watford Football Club over the past year".
Watford is in 16th place in the 20-team league and not in danger of relegation heading into its last match, at home against Manchester City on Sunday.
The former Inter Milan boss helped Watford reach the magical 40 points mark, thereby guaranteeing their topflight status for another season.
Mazzarri's departure is the second season in a row Watford's manager only spends a season with the club.
Walter Mazzarri was ousted at Watford after a dressing room revolt.