Peppers made the announcement in a video posted on Friday by the Panthers.
"I wouldn't change a thing about this journey," Peppers said. "It was the best teacher I've ever had and it was everything I could have hoped for."
Peppers ranks No. 4 in NFL history with 159.5 sacks. His 97 quarterback takedowns in Carolina are the most in franchise history.
"In getting to know Julius over these past months, I've learned that he is a man of few words. When he speaks, everyone listens," Panthers owner David Tepper said in a news release. "With that in mind, I will be brief. He's one of the best to ever wear a Carolina uniform. He carries himself with dignity, integrity and class, and will always be a Panther."
Peppers, 39, had 22 tackles, six passes defensed, five sacks, two forced fumbles and a fumble recovery in 16 games last season. He had eight starts in 2018.
The nine-time Pro Bowl selection was the No. 2 overall pick in the 2002 NFL Draft. Peppers played the first eight years of his career for the Panthers, before joining the Chicago Bears in 2010. He joined the Green Bay Packers in 2014, before returning to the Panthers in 2017.
He was a three-time All-Pro.
"It's not goodbye, it's kinda like 'I'll see you later.' But until then, I'm grateful, satisfied and at peace with all that comes next," Peppers said.