Muggleton joined the Scarlets in 2008 with an impressive CV - having been involved with the Wallabies as defence coach for ten years, including their World Cup victory in 1999.
"It was a mutual decision and very amicable," said Davies.
"John has planned ahead of what next for him and I am sure he has other irons in the fire.
"When we appointed him we felt we needed international experience from a different culture.
"John came here with a lot of experience and has had a significant role in working with a number of our younger players in the squad and developing our team as a whole.
"He has been an important part of our coaching set-up during the past two seasons."
And Muggleton admitted he would look back on his time at Scarlets fondly.
"I have enjoyed my time in Llanelli and it has been great to work within this very passionate rugby region with an amazing heritage," said Muggleton.