Bussell, 36, said she would bring her full-time ballet career to a close at the end of this winter season. She wanted to spend more time with her family, she said.
The dancer added that she wanted to leave dancing while she was on top form, rather than "be one of those who just fizzle out".
She will, however, make appearances as a principal guest artist from next season onwards. She told The Independent: "I've always wanted to go out gracefully. It is a difficult decision but I didn't want to start cutting out ballets and get to the point where I could not do a Swan Lake. I've seen a lot of dancers dance until they can't dance any more.
"I am devoted to the Royal Ballet and I love my work but [the decision] is very much to do with my family. Dancing is so physical and if I have one bad night with one of my girls then my ballet suffers."
The move will allow her to spend more time with her husband, Angus Forbes, a City banker, and their two daughters: Phoebe, four, and 21-month-old Zoe.
Tony Hall, the Royal Ballet's chief executive, said: "I'm delighted that she's going to continue appearing at Covent Garden, albeit in a new role."
Bussell, who became the youngest principal of the Royal Ballet, aged 20, said she was looking forward to selecting a new, less intensive repertoire. She thanked the colleagues and audiences who have supported her during her 19 years with the company.
She hinted at her plans to retire when she spoke earlier in the year about shifting priorities and how her family was increasingly important to her.
"I was doing Swan Lake when I was 20 and I feel so fortunate. There are other things that are important to me now. I know there will be a day when I will be overlooked. That's why I always said I'd want to retire at 35 - I wouldn't want to be one of those dancers who just fizzle out, that would be the most depressing thing. But as long as I keep my standards up, I'll keep going."
Monica Mason, director of the Royal Ballet, paid tribute to Bussell's glittering career and described her as an "inspiration" to younger dancers. "She has always been devoted to the company and from her earliest years has been a truly dedicated professional.
"Her performances abroad have made her an international star and as a ballerina she is a perfect role model and an inspiration to young dancers.
"I sympathise with her desire to spend more time with her family but I am very pleased that she has decided, at this stage in her career, to continue to dance with the company as a principal guest artist."
She will take her final bow as a company principal at the Royal Opera House in June, and become a principal guest artist alongside Sylvie Guillem and Carlos Acosta.Reuse content