Khosla has been on the board of the mobile payments business since June 2011, in addition to being a general partner at venture capital firm Khosla Ventures since 2004. Khosla Ventures holds a 17 per cent stake in Square, making Khosla the second biggest investor in the group behind founder Dorsey.
He has previously worked at Kleiner Perkins Caufield & Byers, and has served as chief executive at Sun Microsystems.
Square said in an SEC filing that Khosla “has previously expressed his desire to step down from our board of directors immediately prior to our initial public offering, consistent with his stated preference not to serve on the boards of directors of public companies”.
As such, his resignation will take effect “upon the effectiveness of the registration statement relating to this offering”.
Square is hoping to raise £275m (£179m) from the IPO. Earlier this month, the firm acknowledged that Dorsey's position at Twitter could “at times adversely affect his ability to devote time, attention, and effort to Square”.