Ian Holloway has left Crystal Palace by mutual consent having decided he had lost the respect of the squad following a terrible start to the club's return to the Premier League.

The writing appeared to be on the wall after Monday's 4-1 defeat to Fulham at Selhurst Park. The manager, along with some of his players, was barracked by sections of the home support as they departed from the pitch after the defeat, Palace's seventh in eight league games following promotion from the Championship last season, with some chanting "Out, out, out!" in the direction of the manager.

Holloway did not arrive for the post-match press conference until 11.15pm having been locked in a meeting with the Palace co-chairman Steve Parish for more than an hour. It is believed Holloway offered to resign during the talks only to be persuaded not to by Parish.

The pair, along with the managing director Phil Alexander, held a further meeting on Tuesday morning at Palace's training base in Beckenham when Holloway confirmed he wanted to leave the club less than a year after arriving and having guided Palace to the top flight via a 1-0 victory over Watford in May's Championship play-off final.

Palace made 16 signings over the summer and the former manager believes that has eroded the spirit of the squad, something he outlined during Monday's press conference. "We've lost five games since we named the [squad of] 25 and there's something wrong there," he said. "I don't feel we have the same spirit. That squad is what we've got till January, so they better buck up and learn to stick together."

The 50-year-old joined Palace in November 2012, replacing Dougie Freedman, and guided them to fifth in the Championship. Victory over Brighton in the play-off semi-finals saw them reach May's final at Wembley where they overcame Watford to secure a place to the Premier League for the first time in eight years.

In the interim, however, Holloway has had to deal with the loss of Wilfried Zaha to Manchester United and the on-going absence through injury of last season's top scorer Glenn Murray.

Palace have lost every game in the current campaign bar a 3-1 victory over bottom-placed Sunderland on 31 August. They also lost to Bristol City in the second round of the Capital One Cup, with Monday's defeat, during which they had taken the lead via Adrian Mariappa's seventh-minute goal, arguably the most dispiriting.

The former Palace manager Neil Warnock is among the front-runners to replace Holloway, with Tony Pulis also believed to be in the frame.

Palace's next game is at home to the Premier League leaders Arsenal on Saturday.

• This article was amended on 24 October to correct a sentence that stated Crystal Palace finished third in the Championship last season. It should have said that they finished fifth. Watford finished third.