His resignation means that the Kiwis will travel to the United Arab Emirates for a limited-overs series against Pakistan without a coach.
Moles, whose contract was due to expire after the 2011 World Cup, was given the backing of the New Zealand Cricket Board earlier in the week after reports surfaced on Thursday that senior players had raised concerns about his tactical and technical input into the team.
However the 48-year-old former Warwickshire batsman has since handed in his resignation.
NZC chief executive Justin Vaughan confirmed that the board and Moles reached an amicable agreement during arbitration, the terms of which will remain confidential, and Moles will not be with the team for their upcoming series in Dubai.
Vaughan said: "Andy has made a significant contribution to cricket in New Zealand, including the recent success of the Black Caps team in making the final of the Champions Trophy."
Problems
Moles revealed that he was left with little choice but to resign from his position after senior players had questioned his abilities to run the team.
"There was a group of players who had lost confidence in my ability as a coach," he said.
"This left me really in an untenable position after that had been so widely reported in the media the day before."
Moles said while he held no grudge against the players, he was disappointed that the areas of concern had not been highlighted previously.
"Over the 11 months that I've been around I had no inkling, no communication that there were problems until we got back after the Champions Trophy," he said.
"Let me be very clear, it is the players' team, they are the most important thing.
"It is unfortunate that it wasn't raised before and that will be looked at, I'm sure, by New Zealand Cricket going forward.
"If I had got some feedback earlier, we may have been able to quell this problem and been aware of it. Obviously we'll never know because the feedback wasn't forthcoming."
He added: "One of the great challenges as a coach is to try and get the chemistry right between the players and the coach. I will take it squarely on the chin that on this occasion I haven't got the chemistry right."
Under Moles, New Zealand managed four draws and three losses in the Test arena and suffered an early exit from the World Twenty20 in England.
