The manager has departed the National League North club after they avoided relegation, finishing four points above the drop zone.
McDonald goes after over six-and-a-half years in charge of the Pics, achieving the highest level of football in their history.
He also guided us to four Walsall Senior Cup triumphs and two Staffordshire Senior Cup titles with Nick Green, David Bridgwater and Trevor Burroughs also departed Dales Lane.
McDonald said: “My journey here may have come to an end, but I love the football club and it will always have a very special place in my heart.
“Everyone has been brilliant; John and Nick Allen have been unbelievable in the way that they have moved this club forward and they have given me so much help and support both on and off-the-pitch, for which I will be eternally grateful.
“We have worked together as a team and as a family to put Rushall Olympic firmly on the football map.
“Sometimes in football, things come to a natural conclusion and you just know that the time is right to move on. I wish Rushall Olympic and all of the good people associated with the club every success going forward.”
The club said in a statement: “We would like to thank Liam for all his hard work and unprecedented success in the six years he has managed our club.
“Rushall Olympic now sit proudly as a Vanarama National League North football club and Liam and his staff have played a huge part in this unbelievable journey.
“We are obviously disappointed with his decision, but Liam and his staff are always welcome at our club and we wish them all the best in the future.”