Despite taking the men in magenta to the BBL final against competition juggernaut Perth in early January, Shipperd has been given his marching orders after 11 seasons.
During Shipperd's 145 matches in charge, the Sixers won two titles and only missed the finals twice.
They are the second-most successful franchise in Big Bash history with three titles, behind the Scorchers with six.
Shipperd will also leave his post as head coach of the NSW men's team, despite the Blues remaining in contention to qualify for the Sheffield Shield and one-day cup finals when those competitions resume.
"Cricket NSW is such a historical and beautiful beast and it has been an honour and privilege to coach the NSW Blues and Sydney Sixers for such a period," Shipperd said in a statement on Saturday.
"The organisation is made of folk from the country to the city and of all dimensions - sports lovers, builders of community, a vehicle for good.
"With 10 NSW-contracted players, not including the big five Test players, engaged in Australian and Australian A duties, domestic finals still beckoning and more good stories abounding, the future is promising.
"My contract was to conclude at the end of the 2026/27 season and so I'm incredibly disappointed that I will not have the opportunity to honour my commitment and continue to develop the wonderful young players I have been working with."
Shipperd took charge as NSW coach in November 2022 with the program in crisis following a record-breaking winless run.
Cricket NSW will begin searching for their next coach for the Blues, and the Sixers, but are unsure if the positions will be held by the same person or kept separate.
"Greg Shipperd's leadership has had a positive impact on the NSW Blues and Sydney Sixers throughout his association with Cricket NSW," Cricket NSW boss Lee Germon said.
"Decisions to change key personnel are never easy, but we felt it was time to move in a new direction to give the Blues and Sixers the best chance to win titles."
Shipperd first started coaching at state level with Tasmania in 1991, also going on to lead Victoria for more than a decade.
The 69-year-old was the foundation coach of the Melbourne Stars in the BBL, before moving into his role with the Sixers in 2015.
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