Sri Lanka Cricket (SLC) secretary Nishantha Ranatunga said that Farbrace this morning officially informed his decision to the SLC executive committee.
Only yesterday SLC had expressed optimism that the former Kent player would stay on with Sri Lanka despite offers from the England and Wales Cricket Board to become the deputy for Peter Moores.
Farbrace was at the helm when Sri Lanka won the World T20 title earlier this month by beating India in the final. He had earlier guided Sri Lanka to annexe the Asia Cup and emerge triumphant in the Test and ODI series in Bangladesh.
He joined a long succession of head coaches for the national side and leave the job abruptly since the last World Cup held in 2011.
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Trevor Bayliss left the job after the World Cup, leaving the Australian Stuart Law as the interim coach. Law was succeeded by the Sri Lankan Rumesh Ratnayeke until the arrival of the Australian Geoff Marsh.
The former Aussie opening batsman was sacked by Sri Lanka and the SLC incurred severance pay as Marsh filed legal action for unfair dismissal.
SLC sources said Farbrace was still under a period of probation and his contract was suppose to run until the end of 2015.