“Peter will be taking an indefinite break from professional cycling due to ongoing mental health issues,” Bora-Hansgrohe said in a statement.
“The Team supports Peter in his decision and have agreed that this is the best course of action to ensure he can return to full health in the near future."
The 2014 and 2015 British road racing champion was a member of the Team Sky who helped Chris Froome win two of his four Tour de France titles in 2013 and 2015.
The 29-year-old, who won the team pursuit gold medal at the London Olympics with Edward Clancy, Geraint Thomas and Steven Burke, left the British outfit for Bora-Hansgrohe last year.
“I would like to thank everyone at Bora-Hansgrohe for their support and understanding to allow me to recover away from the sport. I wish the team the best of luck for the rest of the season,” Kennaugh said.