Kieran McKenna has confirmed Luongo will leave the club when his contract expires next month, having played a vital role in their rapid rise from League One to the Premier League.
Luongo's decision, according to McKenna, stems from a desire to play more minutes at club level and ultimately feature in next year's World Cup should the Socceroos qualify.
The 32-year-old retired from international football in 2024 then changed his mind later in the year, having been included in the first squad picked by new Socceroos coach Tony Popovic.
But an untimely ankle setback meant that return never eventuated, with injuries repeatedly proving a source of frustration throughout the midfielder's stop-start career.
Luongo was part of Australia's World Cup squads in 2014 and 2018 but his crowning moment came when named MVP of the 2015 Asian Cup, having helped the hosts win the tournament.
And McKenna fully believes Luongo, who made 10 league appearances this season as the Tractor Boys stumbled to relegation in their first season back in the top flight, is far from finished.
"He can do a really good job still. He's still in good condition, he's training really well," he said.
"He's got a really good chance to push on next year and be a big player for someone and, hopefully, play in the World Cup and all those things.
"That's really about what the decision is based around ... it's the right decision for all parties.
"He deserves to go and start a lot of games next season and hopefully push on and be an important player and earn his spot in the Australia squad if they can qualify for the World Cup."
Luongo joined Ipswich in 2023 after being released by Middlesbrough, having previously had a loan stint at Portman Road in 2012.
"He's been an incredible player for the club," McKenna said.
"If you wanted to look at up until this season in the Premier League, but points per game and win percentages, he might be the best free signing in football history.
"From a football IQ point of view and a game-feel point of view, and I've said this to him, I think he's the best player I've worked with, and I've worked with some really good players.
"His football brain is outstanding. He's a competitor and it's been really good to have him here."
Ipswich Town's clash with West Ham United on Monday morning (AEST) shapes as Luongo's farewell fixture, while McKenna was noncommittal about the future of fellow out-of-contract Australian Cam Burgess.
"There are still conversations going on with the club," he said.
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