Prof Murdoch, who was appointed less than 18 months ago, has been on sick leave since March and Prof Helen Nicholson has been running the financially battered university in his absence.
She would continue as acting vice-chancellor until a permanent replacement was found after a "global search", the university said in a statement.
It became apparent yesterday morning a major announcement was coming from the university when it cancelled a meeting for health sciences staff who were set to be updated about a review of the division.
A source said senior staff were "flurrying around" before the news was released to all staff mid-afternoon.
Prof Murdoch’s departure came a day after a University Council meeting.
Council members yesterday morning declined to speak to the Otago Daily Times, one saying any comment needed to come from the council’s head, chancellor Stephen Higgs.
Mr Higgs would not say whether Prof Murdoch’s employment was discussed at Tuesday’s council meeting or answer further questions about any discussions ahead of his departure.
"We respect Prof Murdoch’s privacy and will not be commenting further," Mr Higgs said.
Prof Murdoch also declined to comment when reached by the ODT.
Less than two weeks ago Prof Nicholson told staff Prof Murdoch remained on medical leave.
It was announced yesterday he had made a full recovery.
In a statement, Prof Murdoch said he would return to the university’s Christchurch campus to resume a position as a distinguished professor.
"I am very pleased to share that I have made a full recovery but the time away has prompted my wife, Lynley, and I to reflect on our future direction.
"This led to the difficult decision to take up new opportunities and to undertake a different pathway at this time."
During his absence the university has been grappling with a $60 million financial storm as staff are confronted with impending cuts that could lead to several hundred job losses.
Prof Murdoch, the former head of the university’s Christchurch campus, took over in February 2022 from Prof Harlene Hayne, who stepped down after 10 years in role.
Soon after he began his tenure he emailed staff saying creating change would be his "highest priority" in the wake of a brutal review following allegations of racism at the School of Physical Education, Sport and Exercise Sciences.
The university has since embarked on a high-profile proposal to change its logo with the traditional coat of arms replaced by a tohu (symbol) and a new Māori name for the institution.
Reflecting on progress made at the university during his tenure, Prof Murdoch said: "The university has made progress towards becoming Te Tiriti-led. Aligning the key strategic initiatives progressed over the past year provides an unprecedented opportunity to guide our university’s future."
Mr Higgs thanked Prof Murdoch for his contribution.
"David is one of New Zealand’s foremost experts in infectious diseases and we are delighted that he will be able to continue to contribute to this important field and others in his capacity as distinguished professor.
"We wish to thank David for his service to the University of Otago during his time as vice-chancellor. David has progressed a number of important strategic initiatives, including our overarching strategic plan, the Compass culture change project and key reviews of employment-related processes and health sciences."
Conducting a global search for his replacement was consistent with best practice and would allow the university to explore all options to find a leader to achieve its strategic goals and uphold its reputation for academic excellence, Mr Higgs said.
It was expected the process would take several months.
