"This club deserves to continue to win and needs a change", Zidane told a hastily convened news conference, adding that he believed the "moment has come."
"After three years the club needs another discourse, another method of working," he said "I don't see myself continuing to win this year and I am a winner, I don't like to lose."
Reporting for @RFI_English on the breaking story of Zinedine Zidane's @realmadrid exit, days after winning a third @ChampionsLeague title in succession #RealMadrid #Zidane @amandalmorrow pic.twitter.com/XKycNunTYhAndy May (@andymay) 1 juin 2018
Having become the Spanish team's coach in January 2016, Zidane was under contract with Real until 2020.
"I have thought a lot about this decision and I can't go back on it," he told reporters Thursday.
The 45-year-old has now won nine trophies since replacing Rafael Benitez in the Santiago Bernabeu dugout in January 2016.
He was flanked at the press conference by Real Madrid president Florentino Perez who said the announcement was "totally unexpected".
Zidane said he was not looking for another club to coach.