Sidwell, 54, will be replaced by Colm Kelleher, head of global capital markets. Christopher Carter, vice chairman of institutional securities, will take Kelleher's capital markets role, Morgan Stanley said in a release.
"David Sidwell has been a key member of our management team at Morgan Stanley and has helped lead the firm through a period of significant change," Chairman and Chief Executive John Mack said in a statement.
Sidwell was a key liaison to investors during the investment bank's 2005 management crisis.
Sidwell, who joined Morgan Stanley in 2004, plans to focus on philanthropic activities.
Kelleher, 49, oversees capital-raising activities for Morgan Stanley's corporate clients. He joined Morgan Stanley in 1989.
He and Sidwell are both British-educated accountants.
Carter, 57, joined Morgan Stanley in London a year ago from the CQS hedge-fund group, where he had been chairman since November 2005.