Yankees closer Mariano Rivera also will retire at the end of the season. Catcher Jorge Posada last played in 2011, leaving shortstop Derek Jeter as the only member of the fabled Core Four that is still active.
Pettitte, 41, has continued to pitch effectively this season, going 10-10 with a 3.93 ERA in 28 starts. But he is on a one-year contract and offered no assurances that he would pitch again in 2014.
The retirement of Pettitte and pending free agency of right-hander Hiroki Kuroda will leave the Yankees with at least two holes in their rotation.
Pettitte is 255-152 with a 3.86 ERA lifetime, and 19-11 with a 3.81 ERA in 44 career post-season starts.
He pitched in eight World Series, winning with the Yankees in 1996, '98, '99, 2000 and '09 while losing with the Yankees in '01 and '03 and the Astros in '05.
Pettitte has two more regular-season starts remaining, including Sunday at home against the San Francisco Giants in what could be his Yankee Stadium farewell.
Joel Sherman of the New York Post first reported the possibility that Pettitte would announce his retirement on Friday.