McCarthy took over from Paul Jewell in November 2012 and is the longest-serving manager in the league by some distance.
He guided Ipswich to the play-offs in the 2014-15 season before being beaten by arch-rivals Norwich City in the semi-finals.
However, Ipswich’s play-off chances have since diminished, with many fans voicing their discontent at the style of play McCarthy has adopted, while at the same time voicing their displeasure at owner Marcus Evans for not spending enough money.
In a statement on the club's website, Evans said the decision was made in “the interest of all parties”.
'It never got to the point where we actually talked about a new contract. It just felt right that it was time for us both to look at different options,' Evans said.
'In his six years here he has made us a very competitive club in what is a very competitive league. No one looks forward to playing Ipswich.
'Mick will see out his contract here and then we will look to make an announcement regarding his successor in due course.'
McCarthy’s long-time assistant Terry Connor will also leave the club after they preside over their final eight games in charge.
Tottenham are reported to be leading the race for Barcelona midfielder Andre Gomes but face competition from Arsenal.
Wolves are keen on Manchester City starlet Oleksandr Zinchenko but will face strong competition for his services.
Didier Deschamps praised France's performance after his side beat Croatia 4-2 in Sunday's World Cup final at the Luzhniki Stadium.
Toby Alderweireld believes Tottenham fans should be proud that the club had so many representatives at the World Cup.