Speculation the end was near for O'Brien intensified after Sunday's 46-12 home loss to Brisbane, with the Knights board meeting on Tuesday night to discuss his position.
After Newcastle cancelled Wednesday's player media commitments, O'Brien informed the Knights squad he was moving on.
O'Brien is expected to see out the last two games of the season - against Cronulla and Parramatta.
The 47-year-old, who guided the Knights to finals in four of his six seasons in charge, leaves Newcastle in 16th spot and needing a win in their last two matches to avoid the wooden spoon.
O'Brien's reign at Newcastle promised plenty but the club has been unable to make the step up and become a genuine title threat, before falling completely off the pace this year.
That situation has not been helped by a raft of injuries nor O'Brien's rotating cast of playmakers.
Conjecture over Kalyn Ponga's future dominated headlines in the second half of 2025.
The Knights have also agreed to pay Parramatta five-eighth Dylan Brown an eye-watering $14 million across the next 10 seasons, starting in 2026.
Newcastle's attacking coach Blake Green looms as the most likely replacement for O'Brien.
Green is highly rated by many at Newcastle, but counting against him is the fact the Knights have scored almost 100 points less than any other team this year.
Beyond Green, Justin Holbrook, Brad Arthur and Willie Peters loom as other options.
Arthur agreed to a new deal with Leeds in the English Super League this month, keeping him at the club until the end of 2026.
At the time of the new deal, Rhinos CEO Ian Blease labelled Arthur "a man of his word".
Peters is also coaching in England at Hull KR and had been linked to a possible job at Wests Tigers before Benji Marshall's team's late-season resurgence.
Holbrook is currently working as an assistant under Trent Robinson at the Sydney Roosters after being cut by the Titans in 2023.
O'Brien's exit comes just days after Des Hasler became the first coach to go this year, after the Titans announced Josh Hannay would replace him in 2026.
Hannay had largely been considered the best coach-in-waiting, but the Titans' decision to move first has taken the Cronulla assistant off the table.
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