Kidney had been appointed to the role of head coach with the Welsh side on May 6th following Mike Ruddock's elevation to the position of Wales national coach. Then however, Gary Ella was sacked from his Leinster role and it soon became apparent that Kidney was the man that Leinster wanted.
The former Ireland assistant coach was in Newport yesterday (Wed) and made his arrangements to vacate the position.
"I have been extremely happy in my association with Gwent Dragons and would like to state that my decision is based solely on family reasons," Kidney said.
"I would like to thank the Dragons' management for facilitating my move back to Ireland."
"Having secured the services of all our international players for the coming season, and with the number of quality young players coming through the system, I believe that Declan's expertise will help Leinster move forward."
Kidney will start by looking for an assistant after Willie Anderson's departure to join Matt Williams in Scotland.
The Corkman will also need to find a manager after the retirement of Ken Ging.