"We would like to thank Luke for his dedicated service over the last three years," said Lakers General Manager Rob Pelinka in a press release. "We wish Luke and his family the best of luck moving forward."
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The news comes just days after Magic Johnson's surprise resignation as the Lakers president. Walton is leaving with two years remaining on his five-year contract.
Magic Johnson resigns as Lakers president: Fans shocked to hear news
Walton thanked the Buss family for the opportunity to coach the Lakers.
"This franchise and the city will always be special to me and my family," he said in the press release.
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The team finished a frustrating and disappointing 37-45 in a season that began with massive expectations following Lebron James' arrival.
Former Cleveland Cavaliers coach Tyronn Lue is considered a strong frontrunner for the Lakers job, league sources told ESPN's Adrian Wojnarowski.
There have been rumors that Walton may be headed to the Sacramento Kings as their new head coach.
Walton coached the Warriors from 2014-2016. When Steve Kerr fell ill, Walton served as an interim head coach with the team during their historic 24-0 start to the 2015-1016 season. This was the same year Golden State achieved 73 wins, an NBA record.
This year, the Warriors are heading to the playoffs for a franchise-record seventh consecutive season.
It all starts tomorrow right here on ABC.
ESPN contributed to this report.