"Next year I won't compete in the Championship, I'll finish my career in MotoGP this season," he told reporters at the Sachsenring.
"It's a decision I've thought about for a long time, and it's a hard decision because this is the sport I love," he added.
"But despite having good opportunities to keep racing, I feel like I don't live racing with the same intensity as before and I now have different priorities in my life."
His factory team last month signed triple MotoGP world champion Jorge Lorenzo from Ducati as Pedrosa's replacement for next season.
Pedrosa, whose top flight career has been plagued by injuries and operations, has spent his entire grand prix career with the Japanese manufacturer since his 125cc debut in 2001.
He was 125cc champion in 2003 and took 250cc crowns in 2004 and 2005. He is also a three times runner-up in MotoGP and has won 31 grands prix with Honda in the top flight as well as 23 in lower categories.
(Reporting by Alan Baldwin, editing by Christian Radnedge)
