Pettitte, 41, a three-time All-Star selection, broke into the majors with the Yankees in 1995. He also pitched for the Houston Astros from 2004-06 before returning to New York. He retired after the 2011 season but returned last year for two final seasons.
"I've reached the point where I know that I've left everything I have out there on that field," Pettitte said in a statement. "The time is right. I've exhausted myself, mentally and physically, and that's exactly how I want to leave this game."
Pettitte is 10-10 this season with a 3.93 earned run average and is expected to make two more starts. He won more than 20 games in a season twice, including 1996 when he finished second to Toronto's Pat Hentgen in the voting for the American League Cy Young Award.
Pettitte is 255-152 in his career with a 3.86 ERA. The 255 wins come in 42nd on the all-time wins list. A total of 218 of the wins came with New York. Only Whitey Ford (236) and Red Ruffing (231) won more games for the Yankees.
Pettitte was on World Series-winning teams in 1996, '98, '99, 2000 and '09.