David Pearce, Grossman's deputy, will be the acting special envoy until a successor is named, State Department spokeswoman Victoria Nuland told reporters at her daily briefing.
Grossman's departure, planned for next month, comes as U.S. Secretary of State Hillary Clinton is also planning to leave office. It was Clinton who had convinced Grossman to come out of retirement to take the job left vacant by the death of Richard Holbrooke in 2010.
"I think you know that the secretary [Clinton] pressed him very hard to come out of retirement," Nuland said. "He initially had committed to work for a year and then he extended that for a period, but he now very much wants to go back to private life, which he will do."
Nuland said Grossman, during his term, presided over the civilian side of the surge in Afghanistan, and led the Obama administration's efforts at the Istanbul, Bonn, Chicago and Tokyo conferences to lay the path forward on the economic side as well as on the security side Grossman's work was credited with setting the conditions for a peace process in Afghanistan.
"So he more than fulfilled the very ambitious mission that the secretary asked him to take on, and he'd now like to get back to private life, which the secretary has agreed to let him do," Nuland said.
The successor to Grossman will be named by whoever is named to take over as secretary of state.
Pakistan's Express Tribune said Grossman also worked to smooth U.S.-Pakistan relations at a particularly difficult period.
The Voice of America said he had to handle the situation stemming from a U.S.-led NATO airstrike in which 24 Pakistani soldiers died as well the U.S. raid in Pakistan's garrison town of Abbottabad in which al-Qaida leader Osama bin Laden was killed.