After a 5-0 thrashing at the hands of Auckland FC at Sky Stadium on Saturday, Italiano revealed he had stood down as Phoenix manager with immediate effect.
The Australian coach has spent the last seven years in the New Zealand capital, having previously served as Ufuk Talay's assistant before getting the top gig for the 2023-24 season.
Italiano took the 'Nix to a second-place finish in his first campaign in charge.
Wellington slumped to 11th last season and currently sit 10th, having failed to win in their last five games.
"To lose 5-0 at home with the season still to play for is unacceptable, I take full responsibility," Italiano said.
"I've told the club, I've tendered my resignation.
"I think it's easier for someone to come in with new energy and refocus the group."
Italiano's exit came after a derby thrashing which was headlined by a comical own goal from Josh Oluwayemi that led to the goalkeeper being substituted at half-time.
Oluwayemi's 24th-minute howler looks destined to be a permanent feature on goalkeeper gaffe compilations after the Phoenix No.1 completely misjudged a Jake Girdwood-Reich clearance at Sky Stadium in Wellington on Saturday.
Approximately 75 metres out from Wellington's goal, Girdwood-Reich cleared a ball downfield and caught Oluwayemi out of his box.
Whether the wind played a part or not, the No.1 misjudged the flight of the ball and was forced to backpedal before heading it into his own net.
He was also caught in no-man's land for Jesse Randall's second as Auckland raced out to a 4-0 half-time lead, prompting Italiano to take Oluwayemi off for Alby Kelly-Heald.
"Even today irrespective if Josh made some errors in goals, it was me that picked him so that falls on me," Italiano said.
"(At half-time) I went in I lost my s**t. I told everyone that was unacceptable and I just simply said to them at half-time, 'you're playing for the badge'.
"The boys battled but the game was already gone."
The Phoenix have also lost all six derbies against Auckland, all of which have come under Italiano's watch.
"I'm not a big fan of the club, Auckland, I don't like the way they do things but you can't lose to rivals like that," Italiano said.
"It's unacceptable anywhere in the world. If Sampdoria play Genoa tomorrow and lose 5-0, I'd want the coach out.
"It's unacceptable and it's in the interest of the club they bring someone in with a bit more energy."
Italiano said he was looking forward to enjoying some sleep now he was out of a job.
Wellington, meanwhile, face Talay's Sydney FC at home next Sunday.
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