Olsen has been in charge of the the national team for 16 years, leading them to the World Cup last 16 in 2002 and the quarter-finals of Euro 2004.
"I have taken my decision. I am not in this job after 2016," Olsen said. "I did this for two reasons. I am already aware of my situation and I will not have the distraction of people debating whether I'm here or not.
"[The Danish Football Association] DBU will have more time to find a replacement."
Denmark are top of their Euro 2016 qualifying group with seven points from four games.
'People will remember us because we got to No.1 in the world rankings and achieved great things - but our biggest regret is that we didn’t win anything': Ex-Everton star Kevin Mirallas opens up on 'honour' of being part of nation's golden generation
‘I’m sure we’d have finished in the top four or five if he hadn’t joined Chelsea in January. Him leaving damaged the team, but we couldn’t stand in his way’: Alan Curbishley reflects on failed Champions League dream after selling key player
