The 62-year-old has been working alongside manager Karl Robinson at stadium:mk since 2010 but has decided this campaign will be his last.
With the Dons in the League One play-offs for the second year running, the former Wycombe boss, who confessed it had been a tough decision to make, will be aiming to finish on a high.
"It is with a heavy heart that I announce my retirement from football," he told the club's official website. "It has been a difficult decision really; it's just something I have felt for a while now even though I absolutely love being here at this club.
"I feel it has been a very successful time, it has been two great years and I just feel that maybe I could finish on a high. I have had some health issues that are starting to restrict my day-to-day duties and with that in mind I believe it is the right time to make this decision.
"I have thought about it for a while and have given both the chairman and Karl enough notice to plan for the club's future. I have thoroughly enjoyed my two years at Milton Keynes Dons and I am extremely proud to be associated with the players in our squad and the club itself."