"It's clear we are entering a new cycle in New South Wales Rugby, we've got this wave of young, vibrant talent - some real gold nuggets - coming through in the next three or four years".
The Waratahs have 12 players in Australia's 28-strong squad that will contest the world under-20s championship final this weekend.
"It's time for another coach to take them on that journey, I'm a one-year prospect and I believe another coach needs to own that".
Gibson said his decision was in the best interests of the team moving forward.
'I've been incredibly invested in this team and NSW Rugby for the past seven years.
Super Rugby semi-finalists and Australian conference winners previous year, the Waratahs finished 12th on the ladder in 2019 after winning only three of their last eight games without the suspended and subsequently sacked Folau.
"His leadership of our Super Rugby playing group through some hard periods has been exceptional, whilst on the field Daryl has overseen and supported the careers of many fantastic players", he said.
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Fined $1300 and suspended from driving for three months after pleading guilty to mid-range drink-driving, the Wallabies hooker this week was hit with a $5000 breach notice by Rugby Australia and banned for four matches.
"I've obviously had discussions earlier in the month but that's a decision for Cheik", Gibson said.
"It's been a challenging period leading people through that".
The 44-year-old New Zealander took over from Wallabies coach Michael Cheika in 2016 but has led the Waratahs to the Super Rugby playoffs just once in four seasons, when they reached the semi-finals last year.
Waratahs chief executive Andrew Hore said he tried to talk the former All Black out of leaving.
Gibson was an assistant coach at the Crusaders, far and away Super Rugby's most successful franchise, before joining Cheika at the Waratahs in 2013.