Raikkonen, 41, is the last driver to win a drivers' championship for Ferrari, having done so in 2007. The Finnish driver is in his 19th season of F1 and has started more races than any other driver in the history of the sport, with 341.
The decision has big ramifications in the F1 driver market. Alfa Romeo has lined up Bottas as Raikkonen's replacement, with Mercedes understood to have already chosen Russell to partner Lewis Hamilton next season.
Raikkonen, who announced the news on social media, said: "This is it. This will be my last season in Formula 1. This is a decission [sic] I did during last winter. It was not an easy decision but after this season it is time for new things.
"Even though the season is still on, I want to thank my family, all my teams, everyone involved in my racing career and especially all of you great fans that have been rooting for me all this time.
"Formula 1 might come to an end for me but there is a lot more in life that I want to experience and enjoy. See you around after all of this! Sincerely Kimi."
Raikkonen won 21 races. He made his debut for Sauber in 2001 before moving to McLaren the following season. At McLaren he forged his reputation as the "Iceman", a nickname he has retained since.
He moved to Ferrari in 2007 and won the championship in his first season for the team, which would turn out to be the high point of his career.
After two difficult seasons he stepped away from F1 at the end of 2009 to pursue opportunities in rally and NASCAR. The Finn then returned to F1 with Lotus in 2012 and then moved back to Ferrari in 2014. He claimed the last of his 21 victories at the 2018 U.S Grand Prix, and in 2019, he moved to Alfa Romeo.
Raikkonen became a popular figure in F1 during his tenure in the sport. Known for being a man of few words, he often gave short, mono-syllabic responses to journalists in response to questions he deemed to be stupid.
He also made a name for himself for the radio messages he delivered to his teams.
While leading the 2012 Abu Dhabi Grand Prix, he famously told his Lotus race engineer, "Leave me alone, I know what to do!," which remains one of the most famous broadcasted radio message in F1 history.