Side by side: Fabio Capello resigned after John Terry was engulfed in a racism scandal [GALLO/GETTY]

Fabio Capello quit as England coach on Wednesday just four months before the European Championship, after publicly challenging the Football Association's decision to strip John Terry of the captaincy.

The Italian, whose contract was due to expire after Euro 2012, walked out on the job after four years following an hour-long meeting with FA chairman David Bernstein and general secretary Alex Horne at Wembley Stadium.

Bernstein publicly undermined Capello last week by not consulting him before taking the captain's armband from Terry, who is facing a racism trial.

Capello criticised the decision on Italian television, insisting it was "absolutely" the wrong decision.

Such a public breach with his employers meant there was no way forward in the job for Capello.

"We have accepted Fabio's resignation, agreeing this is the right decision," Bernstein said.

"We would like to thank Fabio for his work with the England team and wish him every success in the future."

The former Real Madrid and Juventus coach replaced Steve McClaren in the job after England failed to qualify for Euro 2008.

Capello clung onto his job in 2010 despite England's disappointing World Cup campaign. Now England needs a new manager for Euro 2012.

"Shocked about news on Fabio Capello,'' England midfielder Jack Wilshere wrote on Twitter.

"Gutted to be honest, gave me my 1st cap and believed in me! Thank you Mr Capello!''

Capello quit hours after Tottenham manager Harry Redknapp, who was the favourite to replace Capello, was cleared of tax evasion by a jury.