Nugent, who oversaw Australia's worst performance in the Olympic pool in 20 years at London, had volunteered his resignation but hoped to return in a different role after taking a "break", Swimming Australia president Barclay Nettlefold told reporters.
"The last four-six months have been very heavy (for Nugent)," Nettlefold said on Wednesday.
"It was his decision. He came to us. We commend him on his decision.
"He was convinced that he needed to move on. He said he was tired and exhausted."
Australia's swimmers, who have traditionally scooped a big haul from the Olympic pool, returned home from London with a solitary gold medal and without an individual title.
The disappointment sparked a root-and-branch review which probed allegations of drunkenness, bullying and the abuse of prescription drugs within the team in the lead up to London.
The resulting report released earlier this year alleged a "toxic" environment had been allowed to develop.
An admission from five of the men's freestyle relay team that they took Stilnox, a sedative banned by the Australian Olympic Committee, and engaged in schoolboy pranks at a team camp before the Games, placed further pressure on Nugent.
A number of female team members, including Olympic backstroke silver medallist Emily Seebohm, said they had complained to the head coach of harassment by their male counterparts at the camp, but their complaints were not taken seriously.
Nugent, who helped Australia's swimmers bring home their second-best Olympic medals haul at the 2004 Athens Games, initially tried to play down the controversy, but later admitted he had made an error of judgement in failing to act.
Nettlefold said an interim head coach would be appointed in coming weeks ahead of the April 26-May 3 Australian Championships in Adelaide, but added that Nugent would be welcomed back into Swimming Australia's coaching framework in a "mentoring" role for up-and-coming swimmers.
Nugent's contract was to run until the end of the year with an option of a further three years to take in the 2016 Rio Olympics.
Swimming Australia will also bring in a new CEO and high performance director following a highly critical report into governance at the governing body.
"There will be a new leadership structure for the organisation for the Australian Championships and the aim of that structure is to provide our elite and up-and-coming athletes and coaches with the best environment to succeed," Nettlefold said earlier in a statement.
"We have a preferred candidate for the CEO position in Mark Anderson from Hockey Australia, and will look to finalise his appointment next week.
"Similarly we have narrowed the Director of High Performance down to a preference of two candidates and will consult with the new CEO and High Performance Committee before finalising that appointment."