Lowe, who joined the Silver Arrows in June 2013, has now begun a period of gardening leave, amid widespread media speculation linking him with an eventual return to Williams, where he began his F1 career in 1987.
“I have had a fantastically successful and enjoyable three and a half years at Mercedes working with an incredible team of people,” said Lowe, who has played a hand in more than 150 Grand Prix wins and multiple world titles with Williams, McLaren and Mercedes.
“I am now looking forward to a new challenge and wish everyone well at Mercedes.”
Toto Wolff, Head of Mercedes-Benz Motorsport, paid tribute to Lowe’s contribution to the team while also re-iterating his belief that they are well placed to cope in his absence.
“Paddy has played an important part in our success during the past three and a half years and we thank him for his contribution to this significant chapter in Mercedes’ motorsport history,” said Wolff.
“Success in Formula One is not about single individuals but about the strength in depth and technical capability of an organisation.
“We have the talent in place to continue our success of recent years and we plan to build upon it in 2017 and beyond.”
In the short term, Mercedes say their technical organisation will “continue to operate under the proven and established leadership of our senior directors Aldo Costa (Engineering Director), Mark Ellis (Performance Director), Rob Thomas (Chief Operating Officer) and Geoff Willis (Technology Director).”
Lowe's departure leaves another major hole in Mercedes' 2017 line-up as it stands, with the team yet to announce who will drive alongside Lewis Hamilton this season following world champion Nico Rosberg's surprise retirement announcement at the end of last year.