"It is with disappointment that we announce manager Rafael Benítez will leave Newcastle United upon the expiry of his contract on June 30, 2019," the team wrote in a statement on its website.
"We have worked hard to extend Rafa's contract over a significant period of time, however it has not been - and will not be - possible to reach an agreement with Rafa and his representatives."
The team added that Benitez's coaching staff will not return for the 2019-20 campaign.
It's believed that Benitez's decision to leave came down to Newcastle's failure to grant him greater control when it came to recruiting players, according to the Guardian.
The former Liverpool and Real Madrid manager arrived at the club in 2016 and was unable to prevent the Magpies from being relegated. However, he successfully helped them win promotion after just one season in the Championship before finishing the next two seasons in the Premier League in 10th and 13th place, respectively.
Newcastle said a search for Benitez's successor is underway.
Meanwhile, it's understood that Manchester City assistant Mikel Arteta is the early favorite to replace Benitez, according to David Ornstein of BBC Sport.