The conductor, 40, who was appointed to the orchestra in 1980, says he is leaving the post because it demands too much energy.
Although he will no longer front the famous orchestra, which will soon begin work towards Millennium Festivals in London, Birmingham and Vienna, Sir Simon plans to continue working with it "as a guest". He said that his years with the CBSO had been "the most satisfying and fulfilling" imaginable, and that he had forged great friendships there.
But his position, he said, required "150 per cent of anybody's energy and commitment" and there was a limit to the length of time anyone could maintain the necessary intensity for the work.
"We have open-ended plans to tour and record together andI will look forward to giving the orchestra I love and respect so much of my best as a guest from 1998 onwards.
The chief executive of the CBSO, Edward Smith, said: "Although [this is] inevitably a sad moment, we look forward to ... building on the success achieved with Simon, and working regularly with him in the future."
Sir Simon, widely regarded as one of the most brilliant conductors of his generation, joined the CBSO as principal conductor at the age of 25. He was appointed musical director in 1991, a post he retains while conducting orchestras around the world.
By 1998, when his contract ends, he will have been with the orchestra for 18 years. He is next due to conduct the CBSO orchestra on February 20.
Among his other prestigious posts are the principal guest conductor of the Los Angeles Philharmonic orchestra.
Sir Simon was born in Liverpool in 1955. He won the Bournemouth John Player International conducting competition at the age of 19 and he has since conducted a slew of orchestras including the London Philharmonic, Berlin Philharmonic, Boston and Chicago Symphonys. He has also performed at the English National Opera, Royal Opera, the Proms and Glyndebourne.
Sir Simon received his knighthood - awarded in June 1994 - just after it was announced that he was to divorce the first Lady Rattle, the American soprano Elise Ross. He subsequently re-married.Reuse content