Cox has been with the Hornets for 11 years but will hand over duties to his assistant Chris McGuane.
"I'm very proud of my time at the club and particularly the role I played in creating and developing The Harefield Academy partnership, something which is still unique in English football," Cox said.
"Watford has always been a fantastic place for young players to develop - and that will continue to be the case, I have no doubt."
In a statement released by the club, technical director Gianluca Nani said: "I am very sorry to see Nick go but I fully respect his decision - just as I fully respect all of his achievements with the Watford Academy."
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