The former first-team boss, who re-joined Town in January, has had his resignation reluctantly accepted and moves on to pastures new.
Rutter will become First Team Coach at Belgian First Division side KV Kortrijk with immediate effect.
“It’s with reluctance we’ve let Steve go,” Academy Chairman Andy Rossiter said.
“He gave his notice and said he was missing coaching players on a daily basis and missed being involved in football at a higher level.
“We did everything to encourage him to stay at the club including Darren (Way) and myself offering some involvement with first-team duties.
“We’d like to thank Steve for reorganising the Academy and helping us with the interview process which led to Paul Wilson becoming Academy Manager.”
Everyone at the club wishes Steve all the best for the future.