The former Socceroos defender took over after Victory had finished bottom of the A-League in the 2020-21 season and led them to an Australia Cup triumph the following season and back to the championship Grand Final last month.
Victory fell short of a record-equalling fifth A-League title when they were beaten 3-1 in extra time by Central Coast Mariners, the fifth time Popovic had taken a team to the Grand Final and lost.
"Tony enlisted a winning culture which leaves the club in a better place than when he arrived, challenging for titles and using hard work, discipline and respect to drive outcomes," club chairman John Dovaston said in a statement.
"The next step for us is to find someone who will be a natural progression from Tony. He has set the foundations for us and we look forward to appointing a head coach who will be able to use those foundations and go one step further next season."
Popovic was the foundation coach for Western Sydney Wanderers in 2012, leading the expansion club to Grand Final losses in three of its first four seasons and an Asian Champions League triumph in 2014.
The former Crystal Palace centre half also coached Perth Glory to an A-League final loss in 2019 and has had spells in charge at Karabukspor in Turkey and Xanthi in Greece.
