Four-time premiership-winning coach Cleary confirmed at a packed press conference on Wednesday he will not seek an extension with the Panthers beyond the end of the 2027 season.
The Panthers said Cleary will move into a consultancy role within the club, with current assistant coach Peter Wallace to become head coach in 2028.
"The end of next year will be the start of a new chapter for the Panthers, but it's the same book," said chairman Peter Graham.
Cleary will leave as one of the most decorated coaches in the history of the Australian game after turning Penrith into the most dominant force in the NRL era, winning four-straight grand finals between 2021 and 2024, as well as claiming three minor premierships.
The 55-year-old has been coaching at elite level for the best part of 20 years and spoke with PNG Chiefs bosses about becoming their foundation coach.
But he came to the realisation he no longer wanted to be an NRL coach when the Panthers approached him about extending his deal.
"I would prefer not to have had to say anything for some time," Cleary said.
"But ultimately my decision is made. So why not? It also gives Peter a good lead into next year.
"I'm not getting any younger and I want to use the skills I have in different areas … I still love coaching but I have plenty of time to scratch that itch."
Cleary did indicate he would be keen to step into representative coaching.
As a player, Cleary did not feature in State of Origin or win Test caps but his resume at Penrith would have him at the front of the queue should a vacancy land on his radar after his final season with the Panthers.
"I've no interest in coaching another NRL club, if someone thought I was worthy of a rep job I'd consider that probably," said Cleary, who worked as a consultant to Blues coach Brad Fittler in 2024.
"It's definitely something I've started thinking about probably the last 12 months, which I never had before.
"When you're not an NRL coach, that opens up those sorts of doors so it's something that I would consider, if someone felt I was worthy of that."
Cleary only informed his players of his intention to step down in 2027 on Wednesday, while son, club co-captain and halfback Nathan Cleary had been aware of his father's plans for the future for several months.
"He has known for a while and my wife has regularly checked in, 'Are you sure, and all that kind of thing," Cleary said.
"I've had some trusted mentors that I've leant on throughout this process, too.
"The boys know I've done the right thing, because the cheer they gave 'Wal' when he got named (my replacement), they almost took the roof off."
Wallace has signed a three-year deal after long being touted as Cleary's replacement.
Cleary hopes by mapping out his exit with 18 months notice, Wallace will have a smooth transition into the coaching hotseat.
"It's hard to make a call unless we know what the coach is doing," Cleary said.
"I think it was important that we cleared that up. I feel really confident that we have the right guy in Wal here to take us forward.
"He led our NSW Cup team to a premiership in 2022 and when Cameron Ciraldo and Andrew Webster left there was quite a big hole to fill.
"Wal stepped up as defensive coach, and he's led the best defence in the league for many years and done an amazing job."
PENRITH'S RECORD UNDER CLEARY:
2012 - 15th/16. 8W 16L
2013 - 10th/16. 11W 13L
2014 - 4th/16 (prelim). 15W 9L
2015 - 11th/16. 9W 15L
SECOND STINT:
2019 -10th/16. 11W 13L
2020 - 1st/16 (Runners-up). 18W 1L 1D
2021 - 2nd/16 (Premiers). 21W 3L
2022 - 1st/16 (Premiers). 20W 4L
2023 - 1st/17 (Premiers). 18W 6L
2024 - 2nd/17 (Premiers). 17W 7L
2025 - 7th/17 (Preliminary finalists).13W 10L 1D
