The board have cited conflicting long-term plans as the reasoning behind the decision with the 62-year-old's tenure set to end following the conclusion of the current campaign
The hierarchy at Hunky Dorys Park believe that they and the experienced tactician have differing visions for the club and feel it would be best not to renew Cooke's contract for the 2014 season.
The news, which was initially reported by local media, was confirmed by the club in a statement released on Monday evening.
"Over the past number of months it has become clear that the club and Mick were not of the same mind in regard to the future direction of the club," The club statement read.
"Acting in the best long term interests of the club, the board has decided not to appoint Mick for the 2014 season."
Reports suggest that Cooke opted against receiving a pay-off to step down immeditaley to see out the remainder of his contract and attempt to lift the EA Sports Cup on 21st September when they face Shamrock Rovers in the final
Cooke took over from Bobby Browne in February 2011 after spending seven years in charge of the now defunct Monaghan United. The former Irish youth international made an instant impact at the helm as he led the club to Premier Division safety before being rewarded with a two-year deal.
Having assembled a squad of his own, the 62-year-old then mastermined one of the club's most successful seasons as they finished second in the league, qualified for Europe and lifted the League Cup - their first silverware since 2007.
However, with success came heightened expectations and this campaign has seen the Boynesiders struggle for consistency as they attempted to compete on both domestic and European fronts. Sunday's Louth derby defeat to rivals Dundalk was their eight of the campaign and leaves United in mid-table and well adrift of the top five.
Nonetheless, a battling performance in the Europa League against Malmo underlined the progress the claret and blue outfit have made during Cooke's two-and-a-half years in charge. Drogheda have also finished runners-up in the Setanta Sports Cup and have reached their second successive EA Sports Cup final.
The Dublin-born boss enjoyed a lengthy playing career with St. Patrick's Athletic and Drogheda among others before entering manangement with the Republic of Ireland women's team, a role he had for eight years. Cooke was then Damien Richardson's assistant at Shamrock Rovers before taking over the reigns at First Division side Monaghan.
Drogheda United travel to Ballybofey this Friday, for their FAI Cup quarter-final clash with Finn Harps before welcoming Cork City to Hunky Dorys Park the following week in the Airtricity League.