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4 year oldIn a statement, Mrs Conway, 53, said she was stepping down at the end of August to focus on her children, giving them "less drama, more mama".
Her husband, George, an outspoken critic of the president, will also be stepping back from political activism.
She added that her decision was "completely my choice", and that she would announce future plans "in time".
The announcement came hours after one of Mrs Conway's daughters, Claudia, 15, tweeted that her mother's job had "ruined [her] life".
Mrs Conway, who is still scheduled to speak at the Republican National Convention on Wednesday, informed Mr Trump on Sunday night.
A Republican strategist and veteran pollster, she was the first woman to manage a successful US presidential campaign, spearheading Mr Trump's effort in 2016.
As senior counsellor at the White House, Mrs Conway acted as political adviser to President Trump and maintained a highly influential position in the administration.
In contrast, her husband George is a co-founder of The Lincoln Project - a Republican political action committee working to prevent the re-election of President Trump in 2020.
"The past four years have allowed me blessings beyond compare," she said in a statement.
"[George and I] disagree about plenty but we are united on what matters most: the kids," she added.
"Our four children are teens and tweens starting a new academic year, in middle school and high school, remotely from home for at least a few months," continued Mrs Conway. "As millions of parents nationwide know, kids 'doing school from home' requires a level of attention and vigilance that is as unusual as these times."
Claudia Conway's tweet about her mother went viral over the weekend.
my mother’s job ruined my life to begin with. heartbreaking that she continues to go down that path after years of watching her children suffer. selfish. it’s all about money and fame, ladies and gentlemen.
— CLAUDIA CONWAY (@claudiamconwayy) August 23, 2020
She later tweeted that she was taking a "mental health break" from social media, saying "this is becoming way too much".
Kellyanne Conway is one of Mr Trump's most ardent supporters, but has long been a controversial figure. She has become well known for sparring with journalists in defence of the president.
One of her most famous lines was "alternative facts", the phrase she used to describe then White House press secretary Sean Spicer's highly questioned figures about the number of people attending Mr Trump's inauguration.
In a 2017 interview, she cited a non-existent "massacre" to defend the administration's immigration restrictions.
That same year, the US government's ethics advisory board said she should be investigated after she urged people, during a live interview, to buy clothing developed by the president's daughter Ivanka.
More recently, the government's oversight agency advised last year that she should be fired for engaging in banned political activities while in office.
She has often found herself caught between her husband and the president.
Mr Conway has publicly disparaged the president, describing him as "incompetent". The president, in response, has called him a "stone cold LOSER" and said that he had turned down Mr Conway for a job in the justice department.
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