Rosberg made the announcement at a news conference in Vienna, where he is due to be presented with the championship trophy. He made it clear that after achieving his childhood dream of being crowned champion, he wanted to spend more time with his wife, Vivian, and young daughter away from the pressures of Formula One, saying he "could not go through that again."
After twice losing the title in direct battles with Mercedes teammate Lewis Hamilton in 2014 and 2015, Rosberg finally beat Hamilton to the title this year. He confirmed he was not considering returning to F1 at a later date.
"So it's a very special day today to receive the trophy this evening, but for another reason as well," Rosberg said. "I want to take the opportunity to announce I've decided to end my Formula One career in this moment here, on Monday. To explain, ever since I started, when I was 6 years old, I had a very, very clear dream, and that was to become Formula One world champion. It was very clear in my mind, as long as I can think when I was growing up. Now I've achieved that, I've put everything into it for 25 years of racing.
"With the help of everyone around me, with the help of fans, my family, my friends, I've managed to achieve it this year. It's been an incredible experience for me I will remember forever. At the same time, it's been very, very tough. The last two years losing to Lewis were extremely difficult moments for me, which fuelled my motivation in a way I didn't even know was possible, to fight back and to achieve my dream finally. This year was extremely tough, as I put absolutely everything into it. I left no stone unturned from Austin last year where I suffered a lot after the loss.
"I pushed like crazy in all directions. I want to thank everyone who was involved, my family ... a lot of sacrifices. My wife, for example, at home; every time I was home, she understood that I needed to rest so I never did any nights, I didn't have to take after my daughter. Didn't do any nights, didn't do any difficult things, she was always there to support and make everything possible.
"That's one example of the commitment we all put into it. I've achieved this childhood dream, and I'm not willing to do that sort of commitment for another year, and I'm not interested in coming fourth or whatever. I'm a fighter, and I want to win. So I'm not interested to do that again, so I've decided to follow my heart, and my heart has told me to stop there and call it a day, do other things. It's been wonderful. It just feels right to me. I'm very, very excited. My wife Vivian is very excited to have her husband back, and I'm going to be dad again, which is going to be wonderful, so thanks very much for your support all these years. I'm cherishing the moment. It's absolutely awesome, all these experiences now, to share the success with all of you and with all the other people, it's been phenomenal."
Mercedes team boss Toto Wolff added: "This is a brave decision by Nico and testament to the strength of his character. He has chosen to leave at the pinnacle of his career, as world champion, having achieved his childhood dream. The clarity of his judgement meant I accepted his decision straight away when he told me.
"It's impossible to capture the essence of a person in a few short words, but Nico has a special combination of natural talent and fighting spirit that have brought him to where he is today. Throughout his career, people have thought he was on a golden path to success just because his father was a world champion; in fact, I think in some ways that made the challenge greater -- and meant he had to fight even harder with the weight of expectation on his shoulders.
"With Mercedes, Nico has been a relentless competitor, bouncing back from tough times in an inspirational way, and he earned the respect of the sport with his tenacity, his fighting spirit and his grace under pressure. Since 2010, he has poured competitive energy into our team, and we have grown stronger because of it. We simply say 'thank you' for the incredible contribution he has made to our success, alongside two of the all-time great drivers, Michael and Lewis.
"For the team, this is an unexpected situation but also an exciting one. We are going into a new era of technical regulations, and there is a free Mercedes cockpit for the seasons ahead. We will take the necessary time to evaluate our options and then find the right path for our future."
Mercedes has not yet announced who will replace him.