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Former defender Petke initially served as assistant to Hans Backe at the Red Bull Arena before taking over in 2013 - helping the club top the Eastern Conference by nine points in his debut season.
Petke took the Red Bulls to the Conference Finals in the most recent MLS season, where they were beaten by New England Revolution.
"On behalf of the New York Red Bulls, I want to thank Mike for his service to the club these past two seasons as head coach," said sporting director Ali Curtis.
"Mike will always be an important member of the Red Bull family."
During Petke's reign, Red Bulls amassed 109 points in the MLS, with only three teams managing to gain more in that time.
