Watford have blamed Everton's approach for Marco Silva for the Portuguese's axe.
Silva was sacked by the Hornets on Sunday following a run of one win from 11 Premier League matches.
He was identified as Everton's No.1 choice to replace Ronald Koeman, who was sacked back in October.
Watford resisted Everton's approaches for the Portuguese, turning down a £10m offer from Goodison Park.
Silva is believed to have wanted to speak to Everton but Watford held firm, and their form has dipped since.
A club statement suggested the Everton approach was at fault for Watford's dip in form and Silva's subsequent exit.
"This has been a difficult decision and one not taken lightly. The club is convinced the appointment of Silva was the right one and had it not been for the unwarranted approach by a Premier League rival for his services we would have continued to prosper under his leadership," it read.
"The catalyst for this decision is that unwarranted approach, something which the board believes has seen a significant deterioration in both focus and results to the point where the long-term future of Watford FC has been jeopardised.
"For the security and success of the football club, the board believes it has to make a change."
Watford were fifth at the time of Everton's interest following an excellent start to the season, which saw them lose just two of their first nine games.
But their form has been woeful since, winning just three matches.
Saturday's 2-0 defeat at Leicester was the final straw and the board have decided to act.