The 49-year-old, who took up the role in 2001, was under pressure after Ireland exited last autumn's World Cup at the group stage and then could only manage fourth place in the RBS 6 Nations.
O'Sullivan said in a statement: "At the conclusion of the Six Nations championship, and having given my role as national team head coach much consideration, I have come to the decision to step down."
It completes a dramatic turnaround for O'Sullivan, who had been tipped as the next coach of the British and Irish Lions.
But after narrowly missing out on the Six Nations crown last season, Ireland's fortunes plummeted as they went from potential World Cup winners to first-round losers.
Last Saturday's 33-10 defeat by England sealed a miserable tournament for Ireland and signalled the end for O'Sullivan.
His statement continued: "In doing so I would like to thank my management team and all the players that I have worked with during my tenure as Irish coach.
"Their commitment and professionalism in representing their country has been consummate throughout.
"I would also like to thank the IRFU for their unwavering support of me as coach to the team.
"In addition, I would like to thank the Irish rugby supporters who have played a huge role in driving the team on to some outstanding performances in recent years.
"Finally, I would like to wish the Irish rugby team and the IRFU every success in the future, in a professional sport that is becoming more demanding and competitive by the day.
"I will not be making any further comments on this issue for the foreseeable future, and I would ask that the privacy of both myself and my family at this time be respected."