Lord MacLaurin, who joined the company as a management trainee in 1959, said he would be sad to leave after nearly 40 years but would remain busy with his role as the England cricket supremo and his non-executive directorships.
"I'll be sad to leave as it has been my baby. We created it when we came out of Green Shield Stamps in 1977. The aim then was to be the number one. Back then, not too many people gave us much of a chance. I'm very proud of what we've done with what was then a pretty mediocre company.
"But one of the skills is knowing when to leave. I've spent a lot of time bringing people on in the business. And I shall be keeping a fatherly eye on my proteges."
He said that in addition to Terry Leahy, who moved up to the chief executive role in February, there would be other board appointments later this year. Analysts expect these may be in distribution, with another position created to run the growing European operations.
Commenting on Lord MacLaurin's impending departure, deputy chairman David Reid said: "He's a charismatic character and people will miss that. But Tesco is not managed like a Thatcherite cabinet. Decisions are made collectively."
Lord MacLaurin, who turned 60 earlier this year, will step down at Tesco's annual meeting on 4 June.
When he was appointed managing director in 1973 Tesco was a family-run organisation with a "pile it high, sell it cheap" philosophy. But in 1977 Lord MacLaurin won a key battle with the Cohen family in persuading the board to abandon the downmarket and dated Green Shield Stamps.
Tesco gradually started to re-invent itself as the friend of the middle classes and a genuine rival to Sainsbury with brighter stores, stocking higher quality goods at keen prices in increasingly larger, out-of-town locations.
The expansion continued in the 1980s until in the last few years Tesco began to draw close to and later overtake Sainsbury.
The strong performance continued yesterday with the group's results for the year to 22 February showing a 10 per cent increase in pre-tax profit to pounds 750m.
Margins fell 0.4 percentage points largely due to the petrol price war which has now eased.
Like-for-like sales increased by 7.5 per cent and are running 6 per cent higher since the year-end.
However, the company said that inflation fell from 3 to 1 per cent making the industry more competitive.
The strong sales growth means Tesco maintains its market lead over Sainsbury. According to figures from the Institute of Grocery Distribution, Tesco's UK market share is 14 per cent compared with Sainsbury's 12 per cent.
Tesco will this year open eight superstores, 12 compact stores and four city centre Metro stores. However, it will open only two branches of Tesco Express, the petrol stations with convenience stores attached, after the impact of last year's petrol price war.
"It was a trial and we've put Express on the back-burner for now," Lord MacLaurin said. He said pizza bars and hot food had been added to several stores with good results. These will be added to new stores and refits as the company feels the hot food and take-out market has growth. potential. "We are doing cooked chickens and pizzas. We could do hot pies and burgers. There is huge potential."
The Items range of Tesco clothing is also to be expanded as it follows Asda with its successful George range.
Though Tesco is expanding in central Europe and Ireland with the recent purchase of the Quinnsworth stores, Lord MacLaurin said there was still room for growth in Britain. "We have flexible formats with the superstores, compacts and Metros and that will help us continue to grow." Tesco has signed up 9.5 million members to its loyalty card and 190,000 to its ClubCard Plus deposit account scheme. The push into financial services will continue with a new credit card and more new products will follow.
Tesco denied any interest in the Littlewoods high street stores, recently put up for sale. However, it said it could become involved in the sale of gas and electricity. Group sales were up 15 per cent at pounds 14.98bn. The dividend was raised 10 per cent to 7.8p. Tesco shares closed 11.5p higher at 364p.