In a club statement, Albion said that Nicholls took charge in the summer and steered the club to County Cup success for a second year running.
Nicholls also took Albion to an FA Cup Fifth Round place against Super League 1 side Birmingham City Ladies.
Assistant Manager Paul O’Brien and Coach Josh Coney who were part of Nicholls’ backroom team will also be stepping down.
He said “After a lot of thought I have decided to step down as manager of West Bromwich Albion Women FC.
“It was a very tough decision, but one I needed to make for myself.
“Personally, I’d like to thank Mr Rob Lake for giving me the opportunity and wish everyone at the club success in the future.
“I knew this season was going to be tough after the success it had previously, but we were briefed that the priority this season was to develop players and rebuild due to the transition and link with Wolverhampton University.
“This I feel we have acheived. Winning the County Cup was obviously the highlight and I’m so pleased these young players were able to be a part of that success.
“Life is a long journey and you learn from all experiences which I feel I have done this season.”
Albion will now search for a new Head Coach to take the team forward.
