Cricket Board president Upali Dharmadasa said that Whatmore, who is currently with the Sri Lanka team participating in the fournation centenary tournament in Kenya, had informed them on Monday that he be released when his contract expires at the end of June next year.
An AFP news agency report from London dated Monday, stated that English county Lancashire had hired Whatmore as their head coach on a one-year rolling contract from next year.
Whatmore is expected to fill the position vacated by England coach David Lloyd.
Dharmadasa said that Whatmore's decision not to renew his contract with the Cricket Board was mainly due to family reasons and ruled out that it had anything to do with the financial aspect.
Dharmadasa said that Whatmore would continue as coach of the national team until his contract expires at the end of June next year.
The Cricket Board president said that he had arranged for a meeting with Whatmore on October 11, after the team returns from Kenya.
Sri Lanka have a busy international schedule ahead of them till the end of May next year.
After Kenya, they go to Sharjah for the three-nation Champions trophy tournament in November, then host Pakistan to a three-Test series in January/February before embarking on tours to New Zealand in February/March and West Indies in April/May.
Sri Lanka's cricketing fortunes escalated to dizzy heights after Whatmore took over as coach of the national team in June 1995. He was preferred for the job after unsuccessful attempts made by the Cricket Board to get former Australian captain Allan Border and former England all-rounder Ian Botham.
For the first time, Sri Lanka won a Test and one-day series in Pakistan. They followed this up by winning the three-nation Singer Champions trophy in Sharjah and entered the finals of the Benson and Hedges World Series Cup in Australia for the first time.
However, the crowning moment was when Sri Lanka became World Cup champions in March this year defeating Australia in the final played at Lahore. They confirmed their status as one-day 'kings' by winning the recently concluded four-nation Singer World Series held in Colombo, where again, they beat Australia in the final.
In May this year, Whatmore denied reports that he was planning to quit his job as national coach and sign a contract with English county Yorkshire.