Hodgson has been in charge at Selhurst Park since September 2017 when he replaced Frank De Boer following a troubled start to the season, and has been instrumental in preserving their top flight status ever since.
The 73-year-old former Switzerland, England and Inter Milan manager will be in charge of Palace for the last time against Liverpool this weekend, with his contract expiring at the end of the season.
"After more than 45 years of coaching I have decided that the time is right for me to step away from the rigours of top-flight Premier League football, so our final two matches will be my last ones as manager of Crystal Palace," Hodgson said on the club’s official website.
"It's been a particularly rewarding period of my football life and career to have been able to spend these last four seasons with Palace. I feel now that at the end of another successful season, in which we have secured our Premier League status, the moment is right for me to step down from my responsibilities of being a full-time manager.
"I have had so much support from my wife and family throughout my career and I have been contemplating this decision for some time, and now I believe the time is right to consider them and to see what the future holds for me."
Early frontrunners to replace Hodgson as Palace manager include Frank Lampard, Sean Dyche and Eddie Howe.
