Reports indicate he is instead aiming for a role to play in the South African cricket.
This will come as a big setback for the New Zealand coach John Wright, who alongwith Donald powered the Kiwis to the World Cup semi-final in March.
Fast bowlers like Tim Southee, who flourished under Donald's guidance, will be a worried lot.
Wright's work is cut out as he will have to look for a worthy replacement. Donald completed a ten-week stint.
New Zealand Cricket CEO Justin Vaughan said the organisation had done everything in their powers to keep Donald here, and had at one stage had a verbal agreement about him committing to the role permanently.
"We did everything possible to retain Allan but it is understandable that a role in South Africa would be attractive to both him and his family," Vaughan said.
"Unfortunately, that is the nature of professional sport and although I understand the reasons for Allan's decision, it is disappointing considering the positive discussions we had with Allan about moving to New Zealand and his desire to work with the team."