Fonseca joined Roma in the summer of 2019 after leaving Ukrainian giants Shakhtar Donetsk on a two-year deal with the option for a third.
But both parties have decided not to take up the option of a third season when the initial two-year contract expires this summer.
Fonseca led Roma to fifth place on the Serie A standings last summer and they also made it to the Europa League semi-final this season, although they have a mountain to climb if they are to make it to the final after losing 6-2 to Manchester United in the first leg.
Roma are currently in seventh position on the Serie A standings, 14 points off the Champions League places.
"Over these last two years we have experienced a number of highs and lows, but I have always given my all for this club and this city; a city that has always been so welcoming," Fonseca said in a statement on Roma's official website on Tuesday.
"I would like to thank the Roma fans, everyone we have worked with at Trigoria, the players, and all those who have helped us during this journey.
"We still have some very important games in front of us this season that we want to win, and we will continue to give our all in order to do so."
Chairman Dan Friedkin added: "Paulo guided the team through many challenges, including the Covid pandemic and a change of ownership, and did so with selfless integrity and great character.
"We wish him all the best for his future endeavours and know that he will be a great asset wherever he goes."
