The 65-year-old made the decision following a meeting Monday with Jose Maria Marin, the president of Brazil's football confederation (CBF), reports Xinhua.
His backroom staff, including assistant manager Carlos Alberto Parreira - who coached Brazil to victory at the 1994 World Cup - also stepped down.
"Coach Luiz Felipe Scolari and his fellow coaching staff have left their positions," the CBF said in a statement.
"Scolari and his entire coaching staff deserve our respect and gratitude. They were responsible for making Brazilians fall in love with the national team again, despite not having achieved our greatest goal."
Globo TV and other Brazilian news media outlets earlier Monday reported that Scolari was sacked by the Brazilian football federation, CBF.
Scolari, who led Brazil to World Cup glory in 2002, took charge of the Selecao for a second time following the sacking of Mano Menezes in November 2012.
He guided the team to victory at last year's Confederations Cup with a 3-0 rout of Spain in the final. But having begun the World Cup as tournament favourites on home soil, Brazil crashed out with a 1-7 loss to Germany in the semi-finals.
The result equalled Brazil's worst ever losing margin and was the team's first home defeat in a competitive fixture since 1975.
Former Corinthians manager Tite and Sao Paulo boss Muricy Ramalho are favourites to replace Scolari.