The comedian posted the announcement on her website on Thursday, stating that she felt the position wasn't the "right fit".
"A couple months ago, I let Fox and the American Idol producers know that this didn't feel like the right fit for me. I told them I wouldn't leave them in a bind and that I would hold off on doing anything until they were able to figure out where they wanted to take the panel next," she wrote.
"It was a difficult decision to make, but my work schedule became more than I bargained for. I also realised this season that while I love discovering, supporting and nurturing young talent, it was hard for me to judge people and sometimes hurt their feelings."
DeGeneres added that she will continue to watch the show after her departure.
"I loved the experience working on Idol and I am very grateful for the year I had. I am a huge fan of the show and will continue to be."
Idol creator and executive producer Simon Fuller added: "I loved Ellen's passion for the artists and her nurturing skills. She brought honesty and optimism to our judging panel and I will miss her greatly."
The show's executive producer Cecile Frot-Coutaz said: “We will miss Ellen, she has been the consummate professional throughout her time on the show, and she’ll always be part of the American Idol family.”
Mike Darnell, President of Alternative Entertainment at Fox, said: “It was a joy to work with Ellen. She brought an incredible spirit to Idol and was a great new addition to the team.
"While we’re saddened by her decision, we are very appreciative that she gave us ample notice so that we could work through it together.”
Fellow judge Simon Cowell previously announced that he will not be returning to the programme in order to launch a US version of The X Factor in 2011.