Alonso, who made the switch to Real from Bayer Leverkusen in June of 2025, struggled to gain the full support of his dressing room as an elongated spat with Vinicius Junior over playing time garnered as much attention as his results on the field in the first half of the season.
An apparent lack of support from the players as well as middling results that left the club trailing Barcelona in the LaLiga title fight put the Spaniard under pressure, but a week into 2026, his job seemed to be safe after an improved run of form.
However, a day after Los Blancos' loss to Barcelona in the Super Cup final, it was announced that his time in charge had come to an end.
In a statement, Real Madrid said: "Real Madrid C. F. wishes to announce that, by mutual agreement between the club and Xabi Alonso, it has been decided to bring his time as first team coach to an end.
"Xabi Alonso will always carry the affection and admiration of all Madridistas because he is a Real Madrid legend and has always represented the values of our club. Real Madrid will always be his home.
"We would like to thank Xabi Alonso and all his coaching staff for their hard work and dedication throughout this time, and wish them the best of luck in this new stage of their lives."
Alonso will be replaced by former teammate Arbeloa, who has been in charge of Real Madrid's B-team since May of last year.
The former Los Blancos and Liverpool player returned to the club as a coach in 2020, taking charge of the under-14 side before then becoming the under-19 manager two years later.
He then became the B-team boss in May, and has since led the side to 10 wins, one draw and eight losses in 19 games.
Across his roles with the youth teams, he lifted multiple league titles and cups.
Alonso, who made 158 appearances for Real Madrid during his playing career, took over from Carlo Ancelotti - now the Brazil head coach - on June 1st with a three-year deal after his incredible success with Bayer Leverkusen.
He started with a Club World Cup campaign that saw them defeated 4-0 by PSG in the semi-finals, with murmurings of discontent already starting during that tournament.
His coaching style, more intense than his predecessor Ancelotti, has been reported to wind up the players in the Real Madrid dressing room, with his squad seemingly preferring a more relaxed attitude to both training and tactics.
Despite this, Alonso's league campaign started well, as he won the LaLiga Manager of the Month award in August. But a defeat to local rivals Atletico Madrid and draws to the likes of Girona and Elche, on top of reported unrest within the squad, were enough for rumours to begin swirling about his future.
Those rumours died down after a strong festive period, but a 3-2 defeat to Barcelona in the Super Cup final proved to be the final nail in the coffin.