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.
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