The 47-year-old has been tipped to take over as Australia coach ahead of the 2015 Rugby World Cup, with incumbent Robbie Deans out of contract at the end of the year.
"My experience at the Reds and with Queensland Rugby will be something I'll always treasure but I feel the time is right to pursue new coaching challenges outside of Super Rugby," McKenzie said in a statement.
"Anyone who knows me understands I have strong coaching ambitions and, after spending nine years coaching at a Super Rugby level, I'm excited about pursuing a different role either here or overseas."
McKenzie was appointed Reds coach in 2009, taking over for the 2010 campaign onwards and leading the team to Super Rugby glory in 2011. Their title defence ended with a 30-17 defeat at home to the Sharks in the 2012 qualifying finals.
McKenzie's replacement, Richard Graham, is already in place, having quit the Western Force in April last year to take over as Reds coach for the 2013 campaign, with his predecessor becoming director of coaching.
McKenzie previously led the NSW Waratahs between 2003 and 2008 and is one of the most experienced coaches in Super Rugby.
Speculation has already begun that McKenzie has his eye on Deans' Wallabies post. Asked if he felt his decision to quit the Reds would increase the heat on Deans, McKenzie said: "I don't think it will put pressure on Robbie Deans at all.
"He's got the job and I don't think this will change anything in his day-to-day life. You guys (the press) love conspiracy theories.
"I have made the decision because it is about doing the right thing by the Reds. I could have waited until August and said, 'by the way, I am leaving'. I spent a lot of time here trying to rebuild a team and reputation. It has been a four-year assignment which I have enjoyed."