Guardiola's contract was due to expire at the end of June and he informed the players at training today [Friday] that he would not be extending his stay at the Nou Camp.
Guardiola stepped up from Barca B manager to first-team boss in 2008 and has gone on to become the most successful coach in the club's illustrious history.
He has led the azulgrana to two Champions League crowns, three La Liga trophies, one Copa del Rey, three Supercopas, two UEFA Super Cups and two FIFA Club World Cups.
At a press conference, president Sandro Rosell said: "We have called you today [Friday] to announce that Pep Guardiola will not continue in charge of the team next season.
"Thank you Pep for all the happiness you have brought us and for bringing a model of football that can never be questioned."
Guardiola has operated on short-term deals throughout his tenure but has usually renewed before this stage of the season, prompting speculation he was ready to walk away.
At a press conference, he said: "I would like you to understand that this is not an easy decision for me. But I would like to explain my reasons for this decision.
"I have always wanted short-term contracts. Four years is an eternity as Barca coach. In the month of October I announced to the president and to the sporting director that I thought my spell was coming to an end.
"The main reason why I have taken this decision is because four years is many years.
"I have given everything and I have nothing left and need to recharge my batteries.
"The demands have been great and I have not been able to rest much. I have to recover and the only way I can do that is by distancing myself. Otherwise, we would have ended up damaging each other.
"I know that I'm leaving the best place to work in. I am very satisfied with the result we have achieved. I have had the great privilege of coaching fantastic players. I want to thank them."
"I don't know what I will do now but I will not go straight to coaching."
He is thought to have met with Rosell, vice-president for sport Josep Maria Bartomeu and sporting director Andoni Zubizarreta on Wednesday - the day after they were eliminated from the Champions League by Chelsea - and indicated his desire to leave.
At the club's request he promised to give it further thought but emerged with the same decision.
The setback against Chelsea came just 72 hours after Barca's hopes of retaining their La Liga crown were dashed following a 2-1 defeat at home to arch-rivals Real Madrid.
That loss left them seven points behind Jose Mourinho's men with four games remaining and also ended their domestic dominance.
Guardiola led Barca to La Liga crown in his first season in charge after masterminding a squad overhaul which saw the likes of Ronaldinho and Deco shipped out and a greater emphasis placed on youth.
The results were immediate.
Not only did Barca win the league - the highlight being a 6-2 thrashing of Madrid at the Bernabeu - but they also claimed the Copa del Rey and Champions League crowns.
The 2009/10 campaign kicked off with further success in the Spanish Super Cup, UEFA Super Cup and FIFA World Club Cup as Barca became the first club side to claim six trophies in one calendar year.
They failed to defend their Champions League crown after being eliminated by Mourinho-led Inter Milan at the semi-final stage but retained their La Liga title with a record points total of 99.
With Madrid hiring Mourinho to end Barca's run of success, the 2010/11 season was supposed to pose new challenges for Guardiola.
But the former Spain midfielder, having signed David Villa to replace the ineffectual Zlatan Ibrahimovic, guided Barca to the league title once more and they backed that up by claiming the Champions League crown by defeating Manchester United at Wembley.
Cesc Fabregas joined from Arsenal in the summer of 2011 as Guardiola again placed his faith in products of the famed La Masia academy and while the free-flowing football remained, long winning runs were punctuated with surprise defeats.
The Spanish Super Cup and UEFA Super Cup were claimed, as was the FIFA Club World Cup, but La Liga setbacks against the likes of Getafe and Osasuna undermined their title challenge.
Barca have qualified for the final of the Copa del Rey in which they will meet Athletic Bilbao in what is set to be Guardiola's final game in charge.
As for Guardiola, he is expected to take a sabbatical from the game despite being linked with numerous jobs across Europe.
Barcelona president Sandro Rosell has announced Pep Guardiola's assistant Tito Vilanova will become first-team coach for next season.
He said: "We've always said that if the team needs players, we look at home first (Barca B). Who do we have here at home? Tito."
"We chose Tito because he represents the idea and the image,"
Guardiola endorsed the move. He said: "I think the club has taken the best decision possible.
"He is more than capable. The players know him. He will make few changes. He will give the club and these players something that I thought I could no longer give.
"I could have continued but is not what Barca would have deserved."
Rosell hailed Guardiola's contribution and backed Vilanova to continue Barca's success.
He said: "Pep always takes the best decision for this club. It was his decision and it's a personal one and an understandable one.
"We hope to follow the inheritance that Pep leaves us with the best we can. He has made us proud.
"Now we can confirm that Tito Vilanova will be our new coach. This was a decision taken by Andoni Zubizarreta and it has been ratified today by our executive committee.
"Tito and Andoni will now work on next season's planning and I am sure they will do a good job."