The 35-year-old German star took to his personal Instagram account to release the news in a four-minute video.
Vettel, who is racing with Aston Martin, is currently placed 14th on this year’s championship standings.
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“The decision to retire has been a difficult one for me to take, and I have spent a lot of time thinking about it,” Vettel said.
“At the end of the year I want to take some more time to reflect on what I will focus on next; it is very clear to me that, being a father, I want to spend more time with my family.
“I love this sport. It has been central to my life since I can remember. But as much as there is life on track, there is my life off track, too. Being a racing driver has never been my sole identity.”
After making his Formula 1 debut in 2007, it didn’t take Vettel to become one of the sport’s very best drivers.
He became the youngest world champion in F1 history with his maiden title win in 2010 at just 23 and backed it up by winning three more titles in 2011, 2012 and 2013.
Along with being the youngest title winner in F1 history, Vettel retires with a host of other records under his belt. His 13 race wins in 2013 knotted him up with his compatriot Michael Schumacher for the most ever in a single F1 season.
He also holds the record for the most pole positions in a season (15), the most laps led in a season (739), most consecutive race wins (nine), most consecutive grand slams (two) and most wins from pole position in a single season (nine).
Vettel won 53 races, the third-highest total in F1 behind Lewis Hamilton (103) and Schumacher (91).
However, since switching to Ferrari at the end of 2014, the German has not experienced the same level of success. He has failed to win a single race over the last two seasons, with his last win coming at the 2019 Singapore Grand Prix.
Vettel’s title bids with Ferrari were unsuccessful after promising starts were undone by driver errors under pressure. He led the standings at the midway point in 2017 and was in contention the following year, only to lose both championships to Hamilton. He crashed from pole position at the Singapore GP in 2017 and swerved off track into the barriers when comfortably leading the rain-soaked German GP the following year.
He was stunned when Ferrari did not renew his contract after he struggled to compete alongside newcomers Charles Leclerc in 2019, and again in 2020. He thought about retiring then, before joining Racing Point in 2021.