Ms Donovan, 55, was appointed to the top job at the newspaper in 2002.
In a statement last night the board said: “An immediate internal process will commence to select a successor.”
Sources close to the company said that among a number of potential candidates Liam Kavanagh, the deputy managing director and company secretary, was thought to be the front-runner to succeed Ms Donovan.
Last night Ms Donovan said she was sad to be leaving the paper after nine years at the helm, but said it was always her intention to give up full-time work this year.
She said she was “really pleased” the company had decided to select an internal candidate to replace her.
“It is a great endorsement of the management team we have developed here, where my policy has been to empower and encourage people to make decisions and not to take instructions,” she said.
Chairman of the board David Went said the board fully respected her decision to retire following 32 years of service with the company, eight of them as managing director.
“Under her leadership the company has expanded its print and digital interests and developed a very successful contract printing business,” he said.
“On behalf of the board, management and staff I want to thank Maeve for her loyalty and dedication to the newspaper and the company.
“We wish her every success and happiness for the future,” he added.
The departing Irish Times managing director said that she feels that the professions have a better method of leadership in that managing partners are selected for a specified period of five years or so and then a new leader takes over.
“That helps to keep a keen strategy and a great freshness in an organisation,” she said.
Ms Donovan said she was pleased to be leaving the business on a sound footing with excellent brands and subsidiary brands.
She joined the company in 1997, working in the newspaper’s telesales department, and quickly worked her way up the ranks.
During her term in office the group’s former headquarters of 110 years’ standing in D’Olier Street was sold for over €22 million at the height of the property boom.
She was also responsible for a significant expansion of the group, including the purchase of the website myHome.ie.
It was the second-largest property portal in the country, for which the group paid €50m, shortly before the collapse of the housing market that is still in decline.
The property site was set up in 2001 by estate agents Sherry Fitzgerald, the Gunne Group and Douglas Newman Good.
The Gazette Group Newspapers, a local Dublin enterprise which publishes three local newspapers in west Dublin, was also bought during her term in office, for a figure of €5m.
Some of those ventures caused internal strife and in June last year journalists called on the newspaper’s board and trust to review “the flawed investment and diversification strategy of the company”.