"After three cycles as head coach of the national team, we have decided not to offer him a new two-year period in this position. Certainly, we do not rule out future cooperation," Estonian FA (EJL) president Aivar Pohlak said in a statement.
"We made this decision after last Friday's friendly against Azerbaijan," he added, referring to Estonia's 2-1 home win.
"I want to state that Tarmo is the most successful head coach in Estonia's history. We produced some beautiful performances, played some great matches and delivered some unbelievable results in Euro 2012 qualification."
The EJL added that it expected to name a replacement within two weeks for 59-year-old Ruutli who was reappointed as Estonia manager in December 2007 after his first spell in 1999/2000.
Estonia, who reached the Euro 2012 playoffs as runners-up to Italy in their group but lost 5-1 to Ireland over two legs, were second-bottom of their World Cup qualifying section for next year's finals in Brazil with two wins and a draw in 10 matches.
- Sports & Recreation