McKenna, 40, has been a revelation at Ipswich, taking them from League One to the Premier League before relegation back to the Championship in 2024-25.
The Northern Irishman has now brought them back to the English top flight and has been heavily linked with a move away to Fulham.
However, McKenna has now made the shock decision to step down at Ipswich and will take a break from football.
The former Man United coach still had two years left to run on his deal at the club, and Ipswich are understood to be financially protected should he decide to take a new job within the next 12-months.
Speaking on the club’s side, McKenna said: “It is with a mixture of gratitude, pride, sadness and contentment that I have decided to step down from the honour of managing this historic football club.
“When you have the connection that we have built at this club there is never a good time to say goodbye. However, having achieved a second promotion to the Premier League last season, with another memorable final day in our stadium, and after reflection over the last couple of weeks, I feel this is the right time for me to step aside.
“I do so with great pride at the incredible progress we have made and with huge hope and optimism for the future of the club.
“To manage this club has been an absolute privilege. Over the last five seasons, we have been on an incredible journey that has brought so many of the best experiences in my professional and personal life.
“After giving so much to the role over the previous five seasons, I now look forward to taking a break from management and dedicating some time to my family, who have been with me every step of my career so far.
“There are so many people I would like to thank who have played their part in this journey. Firstly, to Mark Ashton and the Board for giving me the opportunity, at 35 years old, to manage such a massive football club, and for the unwavering support and trust they have shown ever since.
"To my coaching staff and all the wonderful staff at Portman Road and our Playford Road training centre, who work tirelessly to progress the club in every way. To all of the players who have represented the club with professionalism and passion over the past five years.
“Most importantly, thank you to the amazing fans and supporters of Ipswich Town. You have followed this football club through wonderful highs and difficult lows.
“I will be forever grateful for the way that you welcomed myself and my family, both to the football club and to the county of Suffolk. I will cherish the memories that we have shared together for the rest of my life.
“Ipswich Town will always have a special place in our hearts.”