Royle, 60, took temporary charge at Boundary Park in March following the departure of John Sheridan.
The former Ipswich boss told the official Oldham website: "I always said that I was only here until the end of the season. I retain a lot of affection for the club and the fans and that is why I was only too willing to help out over these past few weeks. There is a committed board of directors here who are keen to move the club forward. I am sure with the right appointment success can be achieved."
He had added after the 1-1 draw with Southend last weekend that after four draws and four defeats he wouldn't be happy with him either!
Royle began his managerial career with the Latics, spending 12 years at Oldham between 1982 and 1994. In his 608 games in charge at Boundary Park, Royle guided Athletic to two FA Cup semi-finals, a League Cup final and the top flight for the first time in 68 years.
However, on his return to the League One club, the former Manchester City and Everton boss has failed to win in eight games and Saturday's trip to Walsall will be his final match in charge.
Chief Executive Alan Hardy said: "When Joe kindly agreed to help us out six weeks ago it was always with just the last nine games of the season in mind. After openly discussing the situation with the owners and myself, Joe felt that the best option for the club to take was to look for a younger man to take the helm. Joe has agreed to continue to help but without the day-to-day involvement."
Now chairman Simon Blitz, Hardy and managing director Simon Corney are compiling a list of suitable candidates - with two local faces possibly in their sights.
Stockport's Jim Gannon is the most obvious name in the frame given the traumas he has endured at Edgeley Park. His transformation of the Hatters from the bottom of League Two to League One play-off chasers until their hopes were wrecked by the financial crisis that threatened their existence.
The 40-year-old almost left for Brighton in January, only to turn them down after being interviewed by chairman Dick Knight. However, he would not have to uproot his family should he decide to move to Boundary Park and the relatively stable financial footing may appeal to him.
Rochdale's Keith Hill could also come into contention should they not achieve promotion through the play-offs this term. He has impressed with the way he has taken dragged Dale up by their bootlaces, playing an attractive brand of football.
Another possibility is 39-year-old former Manchester United striker Mark Robins, who has achieved miracles in keeping Rotherham United in the Football League despite a 17-point deduction.
Other names that will be bandied about include former Dale boss Paul Simpson, who is currently at Shrewsbury. Veteran goalkeeper Mark Crossley, who is also coaching at Boundary Park, is also expected to throw his hat into the ring.
However, latest reports have Dave Penney, boss at League Two Darlington, ready to accept the position.
Royle will advise Oldham in the search for a new boss, which they hope will be completed sooner rather than later, and will offer his expertise when called upon in the future.
So another 'messiah' bites the dust, makes you very grateful that our board keeps faith with Tilly, and for once a manager leaves after playing the Blues and not just before!