During a taping of Thursday's show, Letterman said he has informed CBS that he will step down in 2015, when his current contract expires.
He announced no specific end date, telling his audience he expects his exit will be in "at least a year or so, but sometime in the not too distant future — 2015, for the love of God, (band leader) Paul (Shaffer) and I will be wrapping things up."
Referring to CBS chairman Leslie Moonves as "the man who owns this network," Letterman said, "I phoned him just before the program, and I said 'Leslie, it's been great, you've been great, and the network has been great, but I'm retiring.'"
Along with his network, he thanked "all of the people who have worked here, all of the people in the theater, all the people on the staff, everybody at home, thank you very much.
"What this means now," he cracked, "is that Paul and I can be married."
Letterman turns 67 next week. He has the longest tenure of any late-night talk show host in U.S. television history, already marking 32 years since he created "Late Night" at NBC in 1982.
He jumped to CBS to start "Late Show" in 1993. Jay Leno, his rival at the time to host NBC's "Tonight Show," retired earlier this year, making way for Jimmy Fallon.
With the late-night landscape now settling at NBC, the succession plan at CBS becomes the new guessing game. In the wings as a possible successor: Craig Ferguson, host of "The Late Late Show," which follows Letterman.