The former Munster coach and Wallabies assistant has failed to get the Rebels into the playoffs since taking over from the sacked Damien Hill at the end of 2013, and they have won only once in 13 matches this season with two games to play.
"I look forward to following the Rebels as a club and help in the transition of the new coach ensuring that transition is as smooth as possible," McGahan said in a team release on Thursday.
The Australian Rugby Union has agreed to cut either the Rebels or the Western Force from the competition for next season as Super Rugby contracts from 18 to 15 teams. South Africa will announce which two teams they will cut on July 7.
Along with constant media speculation over the future of the playing roster and staff, a huge injury toll has compounded the Rebels' woes this year, which followed an exodus of experienced players in the off-season.
The Rebels have never reached the playoffs since joining the competition in 2011, but McGahan has been their most successful coach, guiding them to seven wins last year and in 2015, despite a constant struggle to lure talent to a state dominated by Australian Rules football.
Both parties had agreed McGahan's departure was in the "best interests" of the club, the team statement said.
"Tony has been a loyal and committed leader of the club since the moment he arrived in Melbourne," Rebels chief executive Baden Stephenson said.
"This has been a particularly tough year on and off the field and we are grateful for the resilience and determination Tony has shown to keep the players and staff focussed on performance."
The ARU has declined to put a time-frame on its decision to axe either the Rebels or the Force but the club has shown its intent to stay in business next season by announcing Stephenson's appointment and player recruitments in recent weeks.
(Reporting by Ian Ransom; Editing by Nick Mulvenney)
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