Cavendish has had a hugely successful Tour, winning four stages and moving to second in the list of all-time winners.
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However, with the race now heading for the Alps, he left France on the second rest day, with four stages to come before the Champs-Elysees on Sunday.
“After an extremely enjoyable and successful couple of weeks at the Tour de France with Team Dimension Data, it is with great sadness that I took the decision today to leave the race,” Cavendish said in a statement.
“After the heat and intensity of the previous stages, we analysed my fatigue levels and decided I’m at a point that would have a detrimental effect on my other big goal for the year, the Olympic Games. To leave a race and organisation that I hold so much respect for and a team that I have such a special bond with, has not been an easy decision at all. I want to say thank you to them, along with all the fans for their support and encouragement, today and over the past 16 stages.
“I wish Team Dimension Data for Qhubeka and all the other competitors luck in the final few days into Paris, a special place that I will definitely miss the emotions of this year.”
Watch Cavendish win a tight sprint on stage 14
Even before the race there had been speculation about how Cavendish would combine the rigours of the Tour de France with the Olympics. But the Manxman confounded expectations by winning the opening stage to claim his first ever yellow jersey, and then took wins in stages three, six and 14. In the process, he overtook the legendary Bernard Hinault to become the second most successful rider in Tour history. His overall tally now stands at 30. He requires four more wins to match Eddy Merckx.
On Monday, Cavendish told Cycling Weekly that he would “wait and see” before deciding whether to quit the race.
“I’ll see how I recover,” he said. “The heat has been the biggest factor for me in this Tour. Even in the mountains, my inability to climb this year has been more a case of the heat than the actuall gradients.”
Cavendish’s stellar career had only two glaring omissions before the Tour – to wear the famous yellow jersey, and to win an Olympic gold medal. In 2008, he and Bradley Wiggins finished a disappointing ninth in the Madison. Four years later, an Alexandre Vinokourov solo attack denied him a sprint finish on the Mall. This year, Cavendish has returned to the track, targeting the omnium in Rio.
The Olympic track events begin on August 11.