WATCH the MLS LIVE on beIN SPORTS | available via Foxtel, Kayo Sports, Fetch TV & beIN SPORTS CONNECT
Former Arsenal and Barcelona forward Henry was appointed by the MLS side in November 2019 after his sacking by Ligue 1 outfit Monaco earlier in the year after just 20 games in charge.
He guided the club to the 2020 MLS Cup Playoffs in his solitary campaign, where Impact was eliminated in the first round by New England Revolution.
Montreal had to relocate to the United States last year amid the coronavirus pandemic and would have to do so again when the new season starts in April.
Henry, who had been linked with the managerial position at Championship club Bournemouth before Jonathan Woodgate was appointed, cited the continued separation from his family as the motivating factor behind his decision.
"It is with a heavy heart that I've decided to take this decision," Henry said in a club statement. "The last year has been an extremely difficult one for me personally. Due to the worldwide pandemic, I was unable to see my children.
"Unfortunately, due to the ongoing restrictions and the fact that we will have to relocate to the US again for several months will be no different.
"The separation is too much of a strain for me and my kids. Therefore, it is with much sadness that I must take the decision to return to London and leave Montreal."
Sporting director Olivier Renard added: "Thierry's departure is unfortunate and premature because this was very promising, but he informed me of his desire to be back with his family because the situation was and remains very difficult for both him and his family.
"I want to thank him, first on a human level because he led the players by example last year by being away from his family, but also from a sporting level and for what we have built together since his arrival.
"We wanted to elevate this club and we are on the right track. The process of finding a new head coach is already underway and I will be looking for someone who is aligned with the philosophy we have implemented."