The 37-year-old Spaniard has had to endure plenty of frustration over the past few years as the once-mighty McLaren team have fallen way off the pace.
Alonso, who won 32 Grand Prix wins in 17 seasons became the youngest ever Formula One world champion while driving for Renault in 2005 before defending his title the following year. This year he has scored 44 points this season and is ninth in the drivers' championship.
“There are still several Grands Prix to go this season and I will take part in them with more commitment and passion than ever,” the statement said.
Interestingly, a separate statement posted on the McLaren website states he could return when it is “the right moment for me to be back in the series.”
Alonso, who hasn't won a race since the 2013 Spanish Grand Prix five years ago, says new challenges await.
He is known to be keen to complete the "Triple Crown" of Formula One champion, winning the 24-hour Le Mans race and the Indy500.
He achieved the first two of those aims with a victory in this year’s Le Mans with Toyota.
“Fernando is not only an outstanding ambassador for McLaren but also for Formula 1,” Zak Brown, McLaren Racing's CEO said in a statement.
“His 17 years in the sport, as arguably the preeminent driver of his generation and undoubtedly an F1 great, have added another layer to Formula 1’s rich history.
"There is a time for everyone to make a change and Fernando has decided the end of this season to be his.”
During his F1 career, Alonso has also claimed 22 pole positions and 97 podiums.
Among those in the frame to replace Alonso are Carlos Sainz Jr and Lando Norris.