The announcement from the League Two club came minutes after Friday's goalless draw with Lincoln City.
Derry has led Cambridge to ninth and 11th-place finishes during his two seasons with the club, but the U's are currently 14th in the League Two table.
"Cambridge United can confirm that head coach, Shaun Derry, will be leaving the club by mutual consent. The club would like to place on record its thanks to Shaun for all his hard work and commitment during the last two years," read a statement on Cambridge's official website.
Meanwhile, Derry said in a statement: "I would like to wish Cambridge United and Paul Barry all the best for the future as he takes over ownership of the club. I would also like to thank everyone connected to the club for making the last two years memorable."
Derry, who turned out for the likes of Sheffield United, Portsmouth, Crystal Palace and Queens Park Rangers during his playing career, managed Notts County for two years before taking charge of Cambridge.