He had been Sammy McIlroy’s number two at Edgeley Park and took over as caretaker boss following McIlroy's departure.
He came close to the permanent job before Chris Turner was appointed manager last week.
Hatters managing director Kevan Taylor praised Lillis’ contribution during his year with the club and said: “Since Mark joined last season he has shown great passion and commitment to his task.
“He stepped into the role of caretaker manager for six games and performed very creditably in difficult circumstances.
“I am sure that he will get back into football very soon as the game needs characters like Mark.”
Lillis, who has previously coached Northern Ireland, added: “I very much enjoyed my time at County and I wish them well for the future.”