"After many months of reflection and internal discussions, we have chosen to make a transition this year in starting to carve out a progressive new role within this institution," they added.
"We now plan to balance our time between the United Kingdom and North America."
The move has apparently shocked the fellow royals, with the BBC reporting no other member of the royal family was consulted prior to the couple's public statement.
A subsequent statement via Royal Communications said 'discussions with The Duke and Duchess of Sussex are at an early stage."
"...These are complicated issues that will take time to work through," the notification read.
The shock news follows a turbulent year for the royal family.
The Duke and Duchess of Sussex spent Christmas in Canada after speaking of the pressure of being in the spotlight following their wedding and son Archie's birth in May.
They had previously announced they would miss Christmas with Queen Elizabeth and the rest of the royal family, choosing to spend it instead with the duchess' mother, Doria Ragland.
Australia 'would respect' Harry and Meghan
Foreign Minister Marise Payne says Australia will respect Britain's Prince Harry and Meghan Markle stepping back as senior members of the royal family.
"I've seen those reports this morning and I regard that as a matter for them," Senator Payne told ABC radio on Thursday.
"If that is something they wish to pursue and they think that they can be productive, effective, do what they want to do in their own lives in that way, then of course that's a decision I would respect and we would respect."
The Australian Monarchist League says the announcement comes as no surprise.
"The intense media intrusion into the duchess's family and unexpected criticism of the duke over jet travel whilst promoting environmental policies would have undoubtedly have firmed their decision," chairman Philip Benwell said.
"Prince Harry has enjoyed immense popularity in Australia and many people will be sorry to see him take a step backwards.
"However, being sixth in succession to the throne, his proposed semi-retirement will have no constitutional consequences for Australia."