The club have announced Sunday's Premier League game against Aston Villa will be his final match after 10 years in charge.
The news comes after several days of intense speculation and signals the end of one of the most successful managerial reigns in English football history.
Since his appointment in 2016, the 55-year-old has overseen 20 trophy wins, including six Premier League titles and the Champions League.
"When I arrived, my first interview was with Noel Gallagher. I walked out thinking, 'OK ... Noel is here? This will be fun. And what a time we have had together," Guardiola said.
"Don't ask me the reasons I'm leaving. There is no reason, but deep inside, I know it's my time.
"Nothing is eternal, if it was, I would be here. Eternal will be the feeling, the people, the memories, the love I have for my Manchester City."
Guardiola's contract was due to expire in the summer of 2027 but he has reached an agreement to step down 12 months early.
His former assistant Enzo Maresca, who has been out of work since leaving Chelsea in January, is the favourite to succeed him.
City pulled off a coup when they appointed Guardiola, widely regarded as the best coach of his generation, a decade ago.
He arrived with a stellar reputation having won the Champions League twice and three La Liga titles with Barcelona, before adding three Bundesliga crowns with Bayern Munich.
His time in Manchester brought sustained domestic dominance, including three FA Cup wins and five League Cups, while his other successes included the Club World Cup.
Among the standout achievements of his tenure were the treble of Premier League, FA Cup and Champions League in 2023, a domestic treble in 2019 and a record-breaking 100-point league campaign in 2018.
He leaves after a domestic cup double this term while hopes of a seventh league title only ended in their penultimate game on Tuesday, when they drew 1-1 at Bournemouth.
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