The 60-year-old Dee will have served in the position for 15 years when he steps down.
"I have thoroughly enjoyed my time in the athletic department, but I have always wanted to teach and be a member of the faculty," Dee said in a statement. "This way, I can transition to the faculty and teach at the University for a few years before I retire. When I look back, I think of a lot of great things that we have accomplished."
During his tenure, the school won one national championship in football, two in baseball, upgraded its basketball program, and joined the Atlantic Coast Conference.
The Florida Sun-Sentinel reported Thursday its sources said school president Donna Shalala was not planning to extend Dee's contract beyond its 2010 expiration date.
"He decided to 'walk away gracefully,'" the source told the newspaper.