Alex McLeish has resigned as Scotland manager.
SFA chief executive Gordon Smith confirmed that McLeish submitted a written resignation on Tuesday afternoon.
Smith said: "We are very disappointed to lose Alex as our manager."
SFA president George Peat said in a statement: "It is with regret that I can confirm that Alex McLeish has notified the Scottish FA that he has resigned from his position as national team coach with immediate effect.
"I am disappointed that Alex has chosen this course of action.
"He is an outstanding manager who has done a fantastic job with the national team."
Peat continued: "Everyone at the SFA and indeed Scotland fans around the world were looking forward to Alex leading us into the World Cup qualification campaign.
"This is why we chose to offer Alex an extended contract while we were in South Africa.
"Sadly, he has chosen not to take up this offer.
McLeish had carefully managed the speculation which began almost immediately after Scotland's defeat to Italy.
He insisted in Durban that it was "absolutely crazy" for people to be backing him as the next Birmingham boss at such an early stage.
However McLeish did admit a Premier League job would be "attractive ... in the long term".
It has apparently come sooner than he dared to suggest, and he is set to be unveiled by Birmingham at a press conference at 10.30am on Wednesday.
Smith accepted that Scotland's success under McLeish had come at a price, telling Sky Sports News: "Alex was doing a very good job and when a job became available there was speculation that he would be interested. It was a mixture of those things.
"What happened was we got an offer from Birmingham to speak to Alex and we rejected that.
The SFA and Birmingham must now reach a financial agreement to indemnify Scotland for their loss.
"There will be compensation and I think it would be substantial," said Smith.