The 69-year-old, who had a two-year spell in charge of England in 1994, believes it is time to revert back to Englishmen after a series of foreign managers have failed to produce results.
Italian Capello announced his resignation on Wednesday night following the drama which ensued after John Terry was stripped of the England captaincy.
However Venables, who backed Capello over the issue of captaincy issue, is adamant quitting has only damaged his own status.
"I was one of the few who had every sympathy with him after the FA pulled the rug from beneath him last week by stripping John Terry of the captaincy without his consent," he told The Sun.
"He should have swallowed his pride and channelled the anger he undoubtedly feels into taking the Three Lions all the way in Poland and Ukraine.
"He should have successfully finished the job he started and was paid so handsomely to do.
"Just when he could have rebuilt his fragile reputation from the ruins of the 2010 World Cup in South Africa, he bulldozed it and fulfilled everybody's preconceptions of him and foreign managers."
Venables admits that his desire is to see an Englishman in charge of the national team and is expecting Tottenham manager Harry Redknapp to be the favourite following his acquittal on all charges of tax evasion at Southwark Crown Court on Wednesday.
"Events of the last few days have rubberstamped my opinion that we need an Englishman in charge of England," he added. "Just like we need a Scotsman in charge of Scotland and a Welshman in charge of Wales.
"We've tried a couple of overseas managers. Let's be honest, they have not worked. We must return to basics. Our roots. Home-grown managers.
"The obvious candidate to succeed Capello is Harry Redknapp. He has done amazing things with Tottenham and would do the same with England.
"It was not the ideal time for the Italian to quit, leaving us in the lurch just four months ahead of a major tournament. But it opens up a fantastic opportunity for someone to make himself an England legend. I hope that man is English."
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