Schumacher, who won almost a third of the races he started and seven world championships, first retired in 2007, before making a return for Mercedes in 2010.
It was revealed last week that Schumacher’s seat at Mercedes will be filled by McLaren’s Lewis Hamilton.
“I have decided to retire at the end of the season,” Schumacher said.
However the German couldn’t shut the door completely. “I still feel I am capable of competing against the best,” he added.
“But the time sometimes comes to say goodbye and this time it might be forever.”
The 43-year-old sealed his place in the annal’s of the sport’s greats long before today’s announcement.
The German holds more driver records than any other racer in the sport’s history.
The debate as to who is the greatest F1 racer of all-time will rage on, with the Aryton Senna, Juan Manual Fangio, and Alain Prost, all competing for mantle which many will claim as Schumacher’s.
Speculation as to the German’s future has been swirling for some time, with many F1 pundits suggesting that a smaller team, such as Force India, might take a chance on the former world champion.