This season Munster have recorded 15 wins out of 18 games and are currently top of the PRO12 and through to quarter-finals of the Heineken Cup for the fifteenth time in the competition's history.
Penney, who initially negotiated a two-year contract with the option for a third year, has opted to decline the extension offer.
The terms and conditions of this extension had been agreed by the Munster Professional Games Committee and the IRFU, but the New Zealander has since attracted the interest of another club and there are terms on offer that are in line with Rob's long-term needs.
Fellow Kiwi and backs coach Simon Mannix, who joined Munster at the same time as Penney, will also leave at the end of this season.
Commenting on the departures, Munster Rugby Chief Executive Garrett Fitzgerald said: "When we reach the end of the season Rob will leave with our thanks and best wishes for the future.
"Rob has been a very positive influence on this Munster squad and management and we are disappointed to see him go as we had hoped that he would fulfil his third season.
"In developing the squad he has highlighted the strength and depth of the Munster panel, with the competition for places as high as ever.
"I would also like to take this opportunity to thank Simon for his work and commitment to the province, and we wish him all the best for the future. He has contributed to Munster's overall campaign and added great value to our coaching team.
"We now need to focus on the remainder of this season and the opportunities ahead in both the Heineken Cup and the RaboDirect PRO12. We are confident both Simon and Rob will continue to strive for success and guide the squad through to the next stage."
Penney added: "I am disappointed to be leaving Munster as I have thoroughly enjoyed my time here. I have to take this opportunity presented to me and prioritise my family and personal circumstances at this time.
"We still have a few months to go and the goals remain the same - I want to achieve success with this great group of lads!"