Mr Yentob, who was chairman of trustees at the charity, has faced scrutiny over his role as well as claims he tried to influence coverage at the corporation of its troubles.
He has always insisted there was no conflict of interest in his decision to call Newsnight about its investigation into Kids Company and had not “abused my position at the BBC’’.
In a statement, he said: “The BBC is going through particularly challenging times and I have come to believe that the speculation about Kids Company and the media coverage revolving around my role is proving a serious distraction.”
The charity folded on 5 August this year, just six days after receiving a £3 million grant in a final bid to keep it afloat.
Mr Yentob added: “I have spoken to Tony Hall [director-general] and told him that I think it best that I step down from my senior management role as creative director at the end of this year and focus on programme making and TV production – including of course the Imagine Series. I will also continue supporting Christine Langan and her team as chairman of BBC Films. I love the BBC and will continue to do everything I can to ensure it thrives and fulfils the great expectations we all have of it.”
The news come two days after chairman of the BBC Trust Rona Fairhead told Radio 4’s Today programme that the corporation’s editorial standards committee were conducting a probe into Mr Yentob’s involvement in the BBC’s coverage of the charity.
He is said to have phoned the BBC2 programme Newsnight in July as it prepared to broadcast a report suggesting the government would withhold further funding for Kids Company unless its founder Camila Batmanghelidjh stood down.
But Mr Hall said that BBC News had concluded that Mr Yentob had not tried to influence their reporting on the charity.
He said: “For the record, BBC News considered whether Alan Yentob had influenced the BBC’s journalism on the reporting of Kids Company. They concluded that he did not. Despite that, I understand his reasons for stepping down. He has been thinking about this for some time and we have discussed it privately.
“I am pleased Alan will be continuing his brilliant work as a programme maker at the BBC.”