Dragons coach Chris Anderson is leaving the Gwent regional side at the end of the season.
Anderson told BBC Sport Wales that financial cutbacks as a result of the imminent departure of benefactor Tony Brown is the reason for his exit.
The Australian joined the Dragons on a one-year deal last July, with both parties having an option to extend the contract for another year.
A month ago, Anderson said he was ready to commit himself to another year.
"After extensive discussions between the board of directors of Newport Gwent Dragons and Chris Anderson, it has been mutually agreed that the option to extend Chris' contract for a further year will not be exercised," said the board in a statement.
Despite having minimal coaching experience in rugby union before joining the Dragons, Anderson has adapted well to the XV-a-side game.
The Dragons are fourth in the Celtic League - the second-best placed Welsh region - and narrowly missed out on qualification to the quarter-finals of the Heineken Cup.
Dragons chief executive Andy Marinos suggested that results were a factor in Anderson's departure, though.
"If you look at our position compared to the other Welsh teams it's a relatively good season for us," he told BBC Sport Wales.
"But it hasn't been quite what we wanted to be honest as we really thought we were in with a shout [of winning things].
"Everyone judges things on Heineken Cup performances and we let ourselves down at home.
"There are seven games to go in the Celtic League and we have to make sure we qualify for Europe next season."
Anderson made his name in rugby league, coaching the Australian national side, as well as club sides Halifax in England and Canterbury and Melbourne in Australia.