Johnston has been at the club for 15 years, serving as chairman for 10.
Recently, he has faced pressure to step down altogether from fans who felt his presence was an impediment to attracting potential club investors.
"It has been an honour to serve Kilmarnock FC in various capacities over the last 15 years," Johnston said.
Meanwhile, BBC Scotland has learned negotiations are continuing between the club and Lee McCulloch and his representative, as Killie look to make him their permanent manager.
McCulloch has been in interim charge at Rugby Park since Lee Clark's departure for Bury in February, and successfully kept Kilmarnock in the Scottish Premiership.
Johnston is also standing down from the board of the Kilmarnock Community Sports Trust (KCST) on which he represented the club.
In a statement, Kilmarnock said: "When Michael took over as chairman and majority shareholder the club had around £13m of debt.
"Aided by a number of high value transfer fees which he personally negotiated, Michael gradually reduced this while maintaining the club's competitive position in the top tier of Scottish league football.
"In March 2014 Michael completed a transformational restructuring of the club's finances which delivered the arm's length sale of the Park Hotel for full market value, with the proceeds going towards reducing the club's bank debt of £9m.
"Billy Bowie acquired the balance of the bank debt and converted this into equity in the club, combined with the permanent write-off by former chairman Jamie Moffat of the balance of his loans to the club, which originally totalled £1.8m.
"The outcome was the elimination of almost £11m of debt from the club's balance sheet.
"In the wake of that, Michael introduced a new board of directors and stood down as chairman in 2015. He also formed KCST, a registered charity, to run the club's community department in a more financially efficient manner."
Troon-born Johnston said the death of his wife Joanne in March hastened his decision to relinquish his positions at the club.
"I have been fortunate to meet so many interesting people through football and greatly enjoyed serving on the council of the Scottish FA for over 10 years and the board of the Scottish Premier League during the historic amalgamation with the Scottish Football League in 2013," he said.
"There have been many challenges to confront along the way and these have taken their toll on not only me but also my family, to whom I extend my heartfelt thanks for their unqualified support.
"The recent loss of my wife Joanne, who was my greatest source of inspiration and encouragement at all times, has prompted my decision to retire from all active duties at the club and I look forward to attending Rugby Park as a committed supporter in future, unburdened of the worries of the past.
"I wish Billy Bowie and John Kiltie the very best of luck and good judgement in running the club, ably supported by club secretary Kirsten Callaghan, who was a key member of staff during my time as chairman.
"I also wish to record my thanks to all the members of staff, past and present, the shareholders and the supporters who have supported me and the club so enthusiastically over the years.
"The club is now in a healthy position to advance in Scottish football and register even greater success."
Former chairman Michael Johnston has resigned from his positions as a director and the company secretary of Kilmarnock.