Smith appointed boss of Rangers 
Walter Smith has quit as Scotland coach to become boss of Rangers for a second time after agreeing a three-year deal.
The Scottish Football Association will now take legal action against him "for breach of contract" and against Rangers "for inducement to break the contract".
Smith, 58, replaces Paul Le Guen and will be assisted by former Rangers favourite Ally McCoist.
Rangers chairman Sir David Murray said: "It's a great pleasure to welcome Walter and Ally back."
Murray added: "I've great respect for both men and their achievements and I am convinced they will take the club forward."
However SFA chief executive, David Taylor, said: "Walter's departure is a serious blow to the Scottish FA.
"He has done an excellent job for us and the Scottish national team. We are very disappointed that he has chosen to leave us at this critical time in our Euro 2008 qualification campaign."
An SFA statement said: "At a meeting this morning with the chief executive of the Scottish FA, Walter Smith delivered a letter of resignation with immediate effect from his position as national coach of the Scotland team.
"No agreement has been reached with Mr Smith or Rangers Football Club on any compensation payment to be made for the early termination of his employment, which is in breach of his contract with the Scottish FA."
Smith said: "I am delighted to return to Rangers as manager. This club has always been in my blood and I can't wait to get started.
"I am looking forward to teaming up with Ally and first-team coach Kenny McDowall.
"I worked side by side with Ally during our time with the national team and I am also delighted Kenny has agreed to join us at Ibrox."
Smith is set for his second spell at Ibrox, after helping Rangers win nine successive titles before resigning in 1998 and moving to Everton.
Both Smith and Rangers legend McCoist have played a pivotal role in Scotland's stunning start to their Euro 2008 qualifying campaign.
Scotland are the surprise Group B leaders in the Euro 2008 qualifying phase, ahead of world champions Italy and World Cup runners-up France.
It had been suggested that Smith would undertake a dual role and continue as Scotland manager until the end of the present European Championship campaign.
Credit - BBC Sport