The 43-year-old Spaniard, who took over at the Vitality Stadium in June 2023 following the departure of Gary O'Neil, guided the Cherries to a ninth-placed finish in the Premier League last season, setting a new club-record points tally.
With Iraola's contract set to expire in the summer, the club had been looking to agree terms on a new deal, but have now reluctantly accepted his departure.
"AFC Bournemouth can confirm that head coach, Andoni Iraola, will leave the club at the conclusion of the 2025/26 season, bringing an end to his successful three-year tenure on the south coast," a statement read.
Iraola has been linked with a return to former team Athletic Bilbao as well as the Manchester United job.
The news of Iraola's departure comes just a few days after a memorable 2-1 win at Premier League leaders Arsenal.
"It has been an honour to manage Bournemouth and I am proud of what we have achieved together," Iraola said on the club website.
"I'm thankful to the players and staff that I've worked with, as well as (chairman) Bill (Foley), who have all made my time here so special.
Foley said Iraola had helped shape a "clear philosophy" within the club, which returned to the Premier League under Scott Parker in 2022, having been relegated the previous campaign after five seasons in the top flight.
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