The Bombers told Wood this week they would not be renewing her contract, but both parties chose to wait until after Sunday's 3.7 (25) to 3.2 (20) loss to the Hawks to inform players, coaches and staff.
The scores were level at halftime and Essendon's defensive structure was impressive, keeping the Hawks scoreless in the final quarter.
However, the Dons gave up nine intercept marks in Hawthorn's attacking half and it proved costly.
It was a needed win for Hawthorn who found themselves in eighth spot on the ladder, one win clear from Fremantle and Adelaide.
But their finals spot isn't cemented with one round remaining.
If the Dockers and Crows win next weekend, and Hawthorn lose to West Coast in Perth, the all-important ladder position will be determined by percentage points.
Wood will see out the season, aiming to claim one more win against fellow cellar dwellers Collingwood at Windy Hill next Sunday.
"This was a difficult decision and we thank her for the role she has played in our history," Essendon chief executive Tim Roberts said.
"When we entered the competition in 2022, Natalie set the standards and culture of our team, and our back-to-back finals in 2023 and 2024 reflected that work."
Roberts added this season has been "challenging".
"We have fallen short of what we wanted on field. We believe a change is the right step," he said.
"Natalie has handled this with real integrity, and her commitment to coaching out the season says a lot about her and how much she cares about the players.
"We thank Natalie for everything she has given the club over five seasons, and we wish her all the best for the next step in her football journey."
GWS coach Cameron Bernasconi has escaped a similar fate.
His side has finished bottom three on the ladder for the past three seasons, but he penned a two-year contract extension at the start of the year.
His Giants team performed similarly to the Dons against Carlton.
The scores were level at three-quarter time, but the Blues found two more goals in the final term to secure the 5.8 (38) to 3.5 (23) win and keep their top-four hopes alive.
Essendon confirmed they would commence their search for a new AFLW coach, while also assessing "every part of the program to make sure it continues to grow with the competition and is positioned to improve".
Wood joined the Bombers in March 2022 ahead of their inaugural AFLW season.
During her tenure, Wood became the first woman to coach 50 AFLW games and led Essendon to finals appearances in 2023 and 2024.
"Building an AFLW program from the ground up takes an enormous collective effort. I'm proud to have led that work and supported our players to grow as footballers and people," Wood said.
"It has been a privilege to be Essendon's inaugural AFLW senior coach."
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