O'Neill or Shearer for the England job

McClaren was officially given the boot following a meeting of the FA's 12-man executive board at Soho Square and the process of finding a successor will now begin.

O'Neill was immediately installed as the early favourite with Villa's American owner Randy Lerner having left the way clear by saying that he would not stand in his path.

He was interviewed for the job prior to McClaren's appointment 18 months ago but the FA top brass were understood to be unhappy over his demands for backroom staff.

Asked this week about the renewed speculation, O'Neill said: "It is pointless to talk about it. I am committed to Aston Villa. I cannot end speculation. I have had it for years and years and years."

Despite the attempt to distance himself from the job, the Irishman would still be expected to give serious consideration to any offer.

Shearer has never managed at any level but could be asked to work alongside a more experienced figure. Croatian coach Slaven Bilic similarly had not been a club boss before he took charge of his national team.

FA chief executive Brian Barwick will lead the recruitment process providing he survives the fall-out from last night's 3-2 defeat by Croatia which cost England a place at Euro 2008.

Barwick appointed McClaren in shambolic circumstances in 2006 and his position is certain to be reviewed by FA chairman Geoff Thompson and other senior figures.

Barwick said today: "There are lots to think and talk about. I am very disappointed for the England fans and very disappointed that we haven't got through."

There were reports that McClaren, who was halfway through a four-year contract and who will walk away with £2.5million, was axed immediately after the game following a late night meeting involving senior board members. But it is understood that the final decision was made early today following a meeting involving Barwick and other FA board members.

The FA were under pressure to make a quick decision because McClaren and other senior FA officials were due to fly to South Africa later today to attend Sunday'sWorld Cup draw.

Since England's next match is not until February, the FA do have some breathing space but could also decide to appoint a caretaker coach with Sir Trevor Brooking, the organisation's director of technical development, the favourite option.

Some senior members of the FA board were said to be in favour of McClaren staying amid the shambles.