Kerr, a former Scotland international, led the side to an FA Women's Cup and Continental Cup double last year in her debut season at Arsenal and will aim to secure an FA Cup and FA Women's Cup double in her last game in charge.
Kerr told arsenal.com: "I've had a fantastic 16 months with Arsenal but feel this is the right time to step aside.
"It's been a privilege to manage one of the leading sides in the women's game and to work with so many talented players. I would like to thank the club for that opportunity and hope to bring my spell with Arsenal to a successful close on Sunday, with the defence of the FA Cup."