He retired at the end of 2006, but was convinced to make a comeback with the
Mercedes team in 2010 by close friend Brawn.
However, his return to the sport he once ruled has not been a success and he
has taken just one podium finish over the last three seasons, that result
coming at Valencia earlier this year.
There had been suggestions Schumacher would join Sauber, for whom he raced
sportscars in the late 1980s and early 1990s, in 2013, but he has instead
opted to stop racing.
Schumacher, his voice breaking with emotion, was flanked by Brawn and Mercedes
motorsport boss Norbert Haug as he made his announcement.
And Haug paid a glowing tribute to Schumacher.
He said: “I thank Michael. We have known each other a long time, we started
together in Group C racing and he went on to be the most successful driver
in Formula One, winning more races and titles than any other driver.
“We were competitors against him (when Schumacher was at Ferrari with Mercedes
supplying McLaren with engines) and we had always dreamed of working
together and it came after Brawn Mercedes won the World Championship in
2009.
“We did not achieve what we wanted to but Michael has laid some strong
foundations and I want to thank him from the bottom of my heart.”