The Brazilian will leave by mutual consent following Saturday's final game of the season against Juventus after an average campaign where the Rossoneri finished third in Serie A and went out at the last 16 stage of the Champions League.
He had never coached before and his appointment to replace Chelsea-bound Carlo Ancelotti last May was another indication of cost-cutting by owner Silvio Berlusconi.
"There's nothing surprising, it's all very clear, today as always. We have arrived at the end," the 40-year-old candidly told a news conference on Friday having previously said his relationship with Berlusconi was "incompatible".
"I don't think the departure of Leonardo will have much impact. There's still work to do. They've got to be sustainable," Giovanni Palazzi, president of Italy-based sports business consultancy Stage-Up, told Reuters.
Milan's seventh European Cup triumph in 2007 seems a long time ago for fans and if not enough big name players or promising youngsters arrive during the transfer window their gates could continue to decline.
Juventus, another former Serie A powerhouse, will finish seventh this season and Inter Milan's success in reaching the Champions League final is as much down to the brilliance of coach Jose Mourinho as the club's spending or pulling power.
"There's a wider problem in Italian football, the problem is not just Milan's," Sean Hamil, lecturer at the Department of Management at Birkbeck College London, told Reuters.
The continued fallout from Italy's 2006 match-fixing scandal is an issue, alongside the fact Italian clubs miss out on revenue compared to E
