The former club assistant, who succeeded Andy Friend as boss in 2023, had been absent from the Irish province's set-up since last month's United Rugby Championship trip to Ospreys.
With the squad now in South Africa for a two-match visit following their Challenge Cup quarter-final loss at home to Racing 92, it has been decided to release Wilkins and appoint assistant Cullie Tucker as interim boss until the end of the season.
Wilkins held a variety of roles across his eight seasons at Connacht, initially arriving as the defence coach in 2017 before becoming a senior coach with responsibility for the attack, head coach under Friend and then head coach with overall responsibility for the professional team.
In a statement issued on the Connacht website, Wilkins explained: "It is with a heavy heart that I am announcing my departure from Connacht, the club and province that I have been so proud to call home for the last eight years.
"During this season, I have been having some very open and honest discussions about my future at the club. Although incredibly privileged to have been given the responsibility of leading the rugby programme here, the longer I have spent in the role, the further away I have found myself from the aspects of coaching not only that I most enjoy but also that allow me to contribute most effectively to the team.
"As such, I have made the decision that it is best for the club, myself, and most importantly my family, that I step away with immediate effect. In doing so, the club and I agree it gives our players, staff and supporters clarity for the remainder of the season, and myself the opportunity to focus on returning to full health before my next coaching challenge.
"I am very grateful to all of the players that have worked so hard and been so eager to learn during this time, as well as the pro team staff who have given me such great support and friendship. To the wider staff of Connacht, the authenticity, pride, commitment and sense of humour that you bring to your work every day has always been an inspiration to me.
"To the Connacht supporters, it has been the most incredible privilege to have had this opportunity to be part of the Connacht family. This is a very special club, in an incredibly special part of the world. Beyond rugby, Galway has become our family home, and Sarah, Harry, Oscar and I have been blessed with the friendships and care that the wonderful people of Barna and the wider province have offered us. Connacht Abu."
Connacht CEO Willie Ruane added: "Today is a sad day for everyone involved in Connacht. For the last eight years, Pete Wilkins has been a colleague and friend to us all, and someone that has always put his heart and soul into trying to make us better and helping us to achieve the type of success that we are all striving for.
"In that time Pete has progressed from his initial role as defence coach to ultimately head coach of Connacht. Prior to his departure on sick leave, Pete had the second-highest league win rate of any Connacht head coach in the professional era and was the first in 15 years to achieve the number one seeding following the pool stages of the EPCR Challenge Cup.
"Needless to say, whilst we are disappointed to see Pete leave, we fully respect and support his decision and we wish him, his wife Sarah and his two sons Harry and Oscar all the very best for the years ahead."
IRFU performance director David Humphreys said: "Pete has contributed an enormous amount to the growth of the game in Connacht, and Irish Rugby owes him a debt of gratitude for his dedication and commitment to the province.
"On behalf of the IRFU, I would like to take the opportunity to thank Pete for his hard work over the last eight years and wish him and his family well in the future. A quality coach and respected figure in Irish rugby, Pete can remember his time in Connacht with pride, and I hope that he will continue to progress his coaching career in the years to come."