The Italian succeeding in guiding Parma to safety after being handed the job with the club in a seemingly hopeless position in January.
Understandably, Parma were keen for the former Chelsea coach to stay on.
However, at a meeting with club officials on Thursday evening, Ranieri informed them he was leaving.
"Claudio Ranieri has informed the club of his intention to leave his role as first-team coach," confirmed Parma in a statement.
"The club would like to thank him for the precious work he carried out, which resulted in keeping Parma in Serie A. We wish him success for the future."
The move appeared automatic once Ranieri had spoken in gushing terms about the challenge that awaits him as Stuart Pearce's successor at City.
Ranieri told Gazzetta dello Sport: "The Manchester City challenge reminds me of the experience I had at Chelsea where without spending £1, we build a good team.
"I created the Chelsea miracle from nothing. My achievement convinced (Roman) Abramovich to buy the club. Then, mountains of money came as well as a selection of top players."
Although it now appears automatic Ranieri will eventually end up with the Eastlands outfit, it could be the end of next week at the earliest before he is formally installed.
Having initially given the impression a deal would be concluded for former Thai PM Thaksin Shinawatra to buy the 29% stake of chairman John Wardle and business partner David Makin by the end of this month, talks have dragged on, with paperwork now being handled by the former Thailand Prime Minister's lawyers.
Although Shinawatra's advisors have insisted the process will not be halted by the damaging ruling in Bangkok on Wednesday that their client had been involved in electoral malpractice, a verdict which prevents him taking up any political role for five years, an irrevocable undertaking to buy Wardle and Makin's shares, without which Ranieri cannot be appointed, is not expected for at least another week.
With an outline pre-season programme in place but unannounced, City officials remain relaxed about the situation, believing there will only be need for concern in terms of potential signings should the matter remain unresolved by the beginning of June.
And, as Ranieri has now turned his back on Parma, an element of certainty is becoming apparent.
Although Ranieri is unlikely to receive anything like the windfall Abramovich provided, a transfer kitty of £50million has been suggested, which would at least allow City to compete for players at a level they were unable to do during Pearce's two years in charge.
So committed is Ranieri to the idea of managing City, he has already set his sights on tackling Manchester United, whose manager Sir Alex Ferguson has already seen 11 Blues bosses come and go during his illustrious two decades at Old Trafford.
Ranieri continued: "The idea is to face Manchester United as soon as possible and be at the same level as them in the standings.
"With Manchester City, I hope to complete every stage. This time, I have been chosen whereas before, Abramovich found me at the club."
Given City have not won a trophy of any description since 1976, competing at the same level as United appears a fanciful notion, especially given the work Ranieri finds he needs to carry out when he eventually takes up the reins.
Former captain Sylvain Distin has already left, with controversial midfielder Joey Barton set to join him should Newcastle meet the £5.5million figure stated in the England international's contract.
At least one, and probably more, new striker is a top priority considering City's paltry goals return last year, while the midfield and defence will also need reinforcing.
Ranieri though is enthused by the challenge.
Having experienced life in both Spain, with Valencia, and Italy, with Parma, since leaving Chelsea, whom he guided to the Champions League semi-finals in 2004, Ranieri is in no doubt England is now the place to be.
He said: "At this time, English football is a fascinating window that hypnotises you.
"Some of the richest men in the world would do ridiculous things in order to buy an English club because the Premier League has become a luxury stage.
"To return to England means to be at the centre of something important."