Preud'homme, 61, also resigned as the club's technical director but will stay on as vice chairman and have a role in the youth academy.
"I must be honest with my myself that age of 61 and ask, 'do I have the strength to continue with all the pressures that a coach has to deal with?'," he said in a video interview on the club's website.
"This lockdown was the ideal opportunity to think about it and the answer is: 'No, I don't see myself as a coach in the future'."
Preud'homme, who started his career at Standard, played at two World Cups in 1990 and 1994, won 58 caps for Belgium and spent five years at Portuguese giants Benfica, where he was then technical director and suggested they hire Jose Mourinho as coach in 2000.
Preud'homme took up a coaching role at Standard the following year and had three separate spells at the club, taking them to the Belgian title in 2008.
He also won the title with Club Brugge in 2016 and had Dutch Cup success with FC Twente in 2011. (Writing by Mark Gleeson in Cape Town; Editing by Christian Radnedge)