Former Test fast bowler McDermott, 47, has worked with great success in developing Australia's fast bowling stocks in the 12 months he has been in the job.
"It has been a very difficult decision to leave my position as the bowling coach of the Australian cricket team, a job I have thoroughly enjoyed since beginning 12 months ago," McDermott said in a statement.
"However, the team's schedule is a particularly busy one and after looking at the upcoming touring demands, I felt this to be the right decision from a personal and professional point of view."
Australia, who have recently returned from a tour to the West Indies, play a series of one-day internationals in England from next month, followed by an ODI series against Pakistan. They host South Africa, Sri Lanka and the West Indies next southern summer.
McDermott has been prominent in the development of young fast bowlers James Pattinson, Pat Cummins and Mitchell Starc along with the renaissance of senior bowlers Ben Hilfenhaus and Peter Siddle.
"It has been a great honour to work with our most exciting bowlers over this period and we have achieved much success," he said.
"The progression of particular players and the improvement of depth in Australian bowling stocks has been the result of much hard work from both sides and is something I am particularly proud of."
McDermott said he will continue to work at Cricket Australia's centre of excellence and was not ruling out being involved with the Australian cricket team in the future.
Head coach Mickey Arthur said McDermott would be hard to replace.
"Craig has taken our fast bowlers to another level and his skills and experience will be sorely missed around the group," Arthur said.
"However, we completely understand and respect Craig's decision
