Taylor, 58, met with the club's joint chairman Julian Rhodes on Wednesday after the Bantams' home defeat to Chesterfield and it has been announced he will be leaving Valley Parade after 12 months in charge.
The Bantams have slipped to 21st place in the npower League Two table, six points above the relegation zone, after a run of one win in their last nine league matches.
Former England Under-21 coach Taylor, who made David Beckham captain of his country during a brief spell in charge of the senior team in November 2000, was installed as Stuart McCall's permanent successor at Bradford in February 2010.
Taylor has previously managed Leicester, briefly in the Barclays Premier League in 2001, Brighton, Crystal Palace, Hull, Stevenage and Wycombe.
Source: PA
Source: PA