Burnley's relegation from the Premier League was confirmed after a defeat to Manchester City last week. The news came after a meeting between Parker and the club's management on Thursday morning.
"It has been a huge privilege to lead the club over the past two years. I have enjoyed it throughout, but feel that it is now time for both parties to move in a different direction," Parker said in a statement.
Scott Parker led Burnley back to Premier League football last season after a 33-game unbeaten run, but this season they have only won four games.
Assistant coach Mike Jackson will lead Burnley in the four remaining games.
