Marshall, who was in the Kiwis team that won the World Cup in 2008, remains part of Kearney's plans but will revert to the role of foot soldier this year.
"It was a very tough conversation," said Kearney.
"Benji is an immensely proud New Zealander and his desire was to continue in the captaincy role.
"Although this decision has been a difficult one, it has been made in the best interests of the team and Benji will remain an integral part of the Kiwis going forward."
Marshall, who turned 29 on Tuesday, led New Zealand for the first time in a World Cup round-robin match against England five years ago in the temporary absence of Nathan Cayless, whom he later succeeded as national captain.
The Wests Tigers half-back went on to score a try and kick two conversions in the Kiwis' shock 34-20 final win over Australia.
New Zealand RL general manager of high performance Tony Kemp said: "Because of who he is, he carries a massive workload for rugby league in general.
"Our respect for him is immense and we appreciate that he's hurting now but we believe this decision will ultimately lift some weight from Benji and give the Kiwis every opportunity to defend the Rugby League World Cup."
New Zealand have called a press conference in Auckland on Friday to announce Marshall's successor.
- Sports & Recreation
- New Zealand