"The cycle of work started in 2006 and which culminated with the elimination of Brazil in the World Cup in South Africa is finished," said a statement from the Brazilian football confederation (CBF) on Sunday.
"The CBF announces the dismissal of the technical commission of the Brazilian team. The new commission will be announced at the end of July."
Dunga, 46, who skippered Brazil to the 1994 World Cup, had been national team coach since 2006.
He had already said that he was intending to step down after four years following the five-time champions 2-1 defeat to Holland in the quarter-finals in Port Elizabeth last Friday.
However, on his arrival home yesterday, Dunga did not rule out staying in the job.
"I am going to rest before meeting, in one or two weeks' time, the president of the CBF, Ricardo Teixeira to talk about it (extending his stay in charge)," Dunga told a news conference before the CBF quickly shattered his optimism.
Brazilian media immediately started speculating on the identity of Dunga's successor whose job will be guiding the team on home soil at 2014 World Cup.
The favourite is Scolari, who won the World Cup in 2002, although he has ruled himself out saying he intends to honour his contract with Palmeiras which runs until 2012.
"I have a contract with Palmeiras and it is here that I am going to work," Scolari told El Dorado radio.
"It would be great to finish my career coaching a team at the World Cup to be staged in Brazil, but I cannot respond to any offer until after 2012."
Other names being mentioned are Mano Menezes, currently coach at Corinthians, and ex-AC Milan boss Leonardo. Jorginho, who was Dunga's assistant in South Africa, is also believed to be in the running.
Brazilian players were met with insults and pushing and shoving from angry fans amid a welter of recriminations for their poor World Cup showing when they arrived in Rio.
Aside from Dunga, the target for much of their ire was Felipe Melo, who deflected in Wesley Sneijder's opener for the Dutch and then got himself sent off.
The Brazilians landed after a 10-hour flight from South Africa and fans immediately vented their anger, judging Melo one of the "fathers of defeat."
Fans were more forgiving with goalkeeper Julio Cesar, some shouting out their gratitude for what they saw as a good showing overall by the Inter Milan shot-stopper who was tearful after the Dutch defeat.
"I am very emotional - I want to thank the Brazilian fans. This was the fruit of three-and-a-half years of work," said Julio Cesar before being driven off along with his mother.
Kleberson, Gilberto Melo, Juan and Thiago Silva also had to run the gauntlet along with team doctor Jose Luiz Runco.
Runco admitted that star midfielder Kaka, who failed to shine at the World Cup, was not properly fit and wouldn't have played at a lesser event.
Kaka came into the tournament on the back of a disappointing season with Real Madrid which was marred by thigh problems which forced him to miss more than six weeks of the season.
"I suffered a lot since I got injured," the 2007 world and European footballer of the year told journalists.
Fans were not impressed and whistles and jeers were aimed in his direction during Real's defeat by Lyon in the last 16 of the Champions League in March.
"They did it in Sao Paulo, Brazil, with Milan ... it happens to all players. The fans are very emotional," he said.
Kaka failed to score in the World Cup and was also red-carded, albeit unjustly, in the group win over Ivory Coast.