Lieberman, accompanied by his wife Hadassah, their children, grandchildren and other family members, made the announcement at a news conference in Stamford.
Lieberman, who turns 69 Feb. 24, turned to the Bible to explain his decision.
"The reason I have decided not to run for re-election in 2012 is best expressed in the wise words from Ecclesiastes: 'To everything there is a season, and a time to every purpose under Heaven,'" he said in a release posted on his official Web site.
"At the end of this term, I will have served 24 years in the U.S. Senate and 40 years in elective office. For me, it is time for another season and another purpose under Heaven.
"I go forward with a tremendous sense of gratitude for the opportunities I have had to make a difference."
The senator also explained why he sometimes chafed under political party constraints during his career in public office.
"Along the way, I have not always fit comfortably into conventional political boxes -- Democrat or Republican, liberal or conservative," said Lieberman, who spoke in support of presidential nominee John McCain at the Republican National Convention in 2008. "I have always thought that my first responsibility is not to serve a political party but to serve my constituents, my state, and my country, and then to work across party lines to make sure good things get done for them."
He said the prospects of a tough re-election campaign in 2012 didn't sway his decision.
"I've never shied from a good fight and I never will," he said.
He said he will spend his final two years in the Senate "doing everything in my power to build strong bridges across party lines -- to keep our country safe, to win the wars we are in, and to make sure America's leadership on the world stage is principled and strong."
He said he will look for new opportunities to serve the country and stay engaged in causes once he leaves the Senate.