Ferguson, 71, guided United to 13 Premier League titles and two European Champions League crowns in 26 years in charge at Old Trafford.
It was not until yesterday that rumours of Ferguson's shock retirement started circulating, but he said it was a decision he had been considering for some time.
"The decision to retire is one that I have thought a great deal about and one that I have not taken lightly. It is the right time," Ferguson said in a statement.
Ferguson, who will remain at United as a director and club ambassador, said he was confident he was stepping down as manager with the squad in good shape.
"The quality of this league-winning squad, and the balance of ages within it, bodes well for continued success at the highest level whilst the structure of the youth set-up will ensure that the long term future of the club remains a bright one," he said.
United gave no indication of a successor amid speculation Everton's David Moyes could fill the Old Trafford hot seat vacated by his fellow Scot. Real Madrid manager Jose Mourinho, who established a friendly rivalry with Ferguson when in charge of United's rivals Chelsea, has also been touted for the role.
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