Ferguson, 71, guided United to 13 Premier League titles and two European Champions League crowns in 26 years in charge at Old Trafford.
It was not until Tuesday that rumours of Ferguson’s shock retirement started circulating, but he said it was a decision he had been considering for some time.
“The decision to retire is one that I have thought a great deal about and one that I have not taken lightly. It is the right time,” Ferguson said in a statement.
“It was important to me to leave an organisation in the strongest possible shape and I believe I have done so,” added Ferguson, who will bow out with United having wrested back the Premier League title this season from local rivals Manchester City.
Ferguson, who will remain at United as a director and club ambassador, said he was confident he was stepping down as manager with the squad in good shape.
“The quality of this league-winning squad, and the balance of ages within it, bodes well for continued success at the highest level whilst the structure of the youth set-up will ensure that the long term future of the club remains a bright one,” he said.
“Over the past decade, the Glazer family have provided me with the platform to manage Manchester United to the best of my ability,” he added in a reference to the club’s US-based owners.
United gave no indication of a successor amid speculation Everton’s David Moyes could fill the Old Trafford hot seat vacated by his fellow Scot.
Real Madrid manager Jose Mourinho, who established a friendly rivalry with Ferguson when in charge of United’s rivals Chelsea, has also been touted for the role.
David Gill, who forged a highly succesful partnership with Ferguson as United’s chief executive that included the unprecedented Treble of 1999 which included the Premier League, Champions League and FA Cup, paid tribute to the veteran manager.
“I’ve had the tremendous pleasure of working very closely with Alex for 16 unforgettable years – through the Treble, the double, countless trophy wins and numerous signings.
“Alex’s vision, energy and ability have built teams – both on and off the pitch – that his successor can count on as among the best and most loyal in world sport,” said Gill, who is also leaving the club this season.
United said Ferguson would remain at Old Trafford as a director and club ambassador. His final game in charge will be against West Bromwich Albion on May 19.
Ferguson is due to have a hip replacement operation after the end of the season but until rumours broke Tuesday there was no indication he was about to step down.
In 2002 it seemed as if Ferguson was on the brink of retirement, having said he as quitting, only for him to make a dramatic U-turn.
The former Glasgow Rangers’ striker’s managerial career began with Scottish lower league club East Stirlingshire in 1974 and saw him win 49 major trophies in all.
Ferguson forged his managerial reputation in charge of Aberdeen, taking the Dons to a trio of Scottish Premier League titles and the 1983 UEFA Cup’ Winners Cup before joining United in 1986.
In spite of all his subsequent success, Ferguson’s early years in charge of United were frustrating as he sought to end the domestic dominance of arch-rivals Liverpool and it appeared as if he might even be sacked in 1989.
But England great Bobby Charlton urged his fellow directors to stick with Ferguson and their patience was rewarded in 1993 when the club won its first English title in 26 years.
“In my early years, the backing of the board, and Sir Bobby Charlton in particular, gave me the confidence and time to build a football club, rather than just a football team,” Ferguson said Wednesday.
Former United midfielder Paul Ince said he was shocked by the announcement.
“He’s done the lot, you will never see anyone of his kind again.”
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