Mayor Stephanie Rawlings-Blake announced O'Malley's departure and several other Cabinet-level staff changes in a statement Friday.
O'Malley, the younger brother of Gov. Martin O'Malley, joined Rawlings-Blake's administration in May 2011, months before her bid to win reelection. He is becoming a government relations partner at the law firm of Venable LLP.
"Peter came in at a critical time and made important changes and structural improvements that will have lasting, positive impact going forward," Rawlings-Blake said.
Before becoming the mayor's chief of staff, O'Malley served as chief of staff to former Baltimore County Executive James T. Smith Jr., worked on his brother's gubernatorial campaigns and was chairman of the Maryland Democratic Party.
Thomasina Hiers, who has been director of the Mayor's Office of Human Services, will serve as acting chief of staff while a "professional search for a permanent Chief of Staff is conducted," according to Friday's statement. O'Malley's departure is effective April 6.
Rawlings-Blake also announced Friday that she is doing away with the title "deputy mayor" and replacing it with the title "deputy chief."
Two weeks ago, Deputy Mayor Christopher Thomaskutty announced he was leaving city government after nine years to become an executive at Mercy Medical Center, leaving only Kaliope Parthemos with the title of deputy mayor.
Rawlings-Blake has had two deputy mayors, a senior adviser and a chief of staff among her top Cabinet members. The title change means she will have three deputy chiefs and a chief of staff.
Yolanda Jiggetts is taking over Thomaskutty's role as the new deputy chief for public safety, operations and CitiStat. Jiggetts, who has been working in Baltimore government since 1999, had been serving as Thomaskutty's deputy director of operations for the past two years.
Parthemos will now be known as the deputy chief of economic and neighborhood development. She began serving in that position, under the title of deputy mayor, in May 2010.
Kimberly Washington, the mayor's senior adviser for governmental and community affairs and her former chief of staff, is being promoted to deputy chief for government and community affairs.
Parthemos and Washington are childhood friends of Rawlings-Blake who have been her top advisers since she was council president.
Rawlings-Blake made several other appointments Friday.
Olivia Farrow is now director of the Mayor's Office of Human Services. Sharon R. Pinder is taking over as director of the Mayor's Office of Minority and Women-Owned Business Development.