The former New Zealand head coach had a series of meetings with Cricket Ireland officials this week, and a "mutual decision" was taken meaning that Bracewell will step down.
"Whilst my wife and I have immersed ourselves into Ireland and Irish culture we feel it is now time to return home to New Zealand and our families. I have therefore agreed with Cricket Ireland to finish up at the conclusion of my contract," said Bracewell.
"I took on the role as head coach because I believed in the little guy getting a fair break and the cause of attaining test status appealed to my underdog psyche. That having been achieved, albeit by an unexpected turn of events, has left me looking for a new goal and challenge."
The 59-year-old took over from Phil Simmons after the ICC World Cup in 2015, and the former Kiwi spinner led the Irish to World Twenty20 qualification after topping their group.
But Bracewell, who played in 41 Tests and 53 one-day internationals for his country, was unable to hault an alarming run of results which saw Ireland thrashed by Afghanistan in the Intercontinental Cup in March.
Ireland also suffered heavy one-day defeats at the hands of New Zealand, England and Bangladesh.
However, Cricket Ireland performance director Richard Holdsworth said Bracewell wasn't helped by an ageing squad.
"The last two years have been a difficult period of transition and rebuilding in which John has tried to nurture inexperienced talent against the best teams in the world," said Holdsworth.
Bracewell, who handed international debuts to eight players, will remain at the helm for the Intercontinental Cup game against the Netherlands next month before taking charge of the one-dayer against the West Indies in September.
First Published: July 19, 2017, 4:40 PM IST