The 50-year-old guided the Pilgrims to a seventh-placed finish last term but they fell at the first hurdle in the play-off semi-finals against Wycombe.
Although he had one year remaining on his contract at Home Park, the two parties have reached a mutual agreement to allow him to terminate that deal in order for Sheridan to return to the north for family reasons.
"It has been a pleasure and a privilege to have been Plymouth Argyle's manager for the last two-and-a-half years, and I would like to thank the board and the green army for supporting me wholeheartedly during my time at Home Park," Sheridan said in a statement published on the club's official website.
"I have thought long and hard about the decision I have reached and I hope people understand the reasons behind it.
"I believe that I leave the club in a far stronger position to reclaim its place at a higher level of the Football League than it was when I first arrived and I wish it nothing but continued success for the future."
Sheridan, previously a manager with Oldham and Chesterfield, moved to the Pilgrims in January 2013 and led them to finishes of 21st, 10th and seventh in the fourth tier.
"Reaching the play-offs last season, two years after surviving the drop into non-league on the final day of the 2012-13 campaign, is an achievement of which John, his management team, and the players should rightly be proud," added owner and chairman James Brent.
"While we would have liked John to continue to plot Argyle's course back up the Football League, we understand his reasons for wanting to leave and have agreed a mutual termination of his contract."
Source : PA
Source: PA