The Cherries confirmed the news in a statement and Howe, who made over 300 appearances for the club as a player and masterminded their rise from League One to the top flight in his second stint as manager, penned a heartfelt letter to supporters.
"After what has been an incredibly challenging few days and following extensive talks between myself and the club I can confirm that we have collectively come to the decision that it would be in the best interests of AFC Bournemouth for me to leave the club by mutual consent," Howe wrote.
"It is difficult to put into words what Bournemouth means to me, both as a town and as a football club.
"Having spent a total of 25 years with the club as both a player and a manager this decision - made together with the club - is one of the hardest I’ve ever had to make.
"However, although the affection and love I have for this football club will always remain, we collectively feel that now is the right time for the club to go in a new direction.
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"Bournemouth will always be in my heart, but I firmly believe that now is the right time for the club to have a change.
"I have always ensured that every decision I have ever made as manager has been in the best interests of the club and its supporters, and this is no different.
Bournemouth's chief executive, Neill Blake, said: "Eddie Howe is synonymous with this football club, both as a player and a manager, and that will never change.
"He is quite simply an AFC Bournemouth legend, having helped transform the identity and history of the club.
"Myself, our owner Maxim Demin and the board’s gratitude and appreciation for Eddie’s achievements cannot and will never be underestimated.
"A decision like this cannot be taken lightly, which is why this has been discussed together at length over the past few days. It is even harder given our close personal friendship.
"We wish Eddie well for whatever the future holds and hope he enjoys some much-deserved and well-earned time with his family."