Gates scaled back from his day-to-day role at the company in 2008 and stepped down as chairman of Microsoft's board in 2014. In addition to stepping down, he's also vacating his seat on the board of Berkshire Hathaway, the conglomerate headed by fellow billionaire Warren Buffett.
In recent years, Gates has taken an active role in the nonprofit Bill & Melinda Gates Foundation, the charity he founded with his wife. He will continue to serve as a technology adviser to Microsoft CEO Satya Nadella.
"Microsoft will always be an important part of my life’s work and I will continue to be engaged with Satya and the technical leadership to help shape the vision and achieve the company’s ambitious goals," Gates wrote in a LinkedIn post.
In a statement from Microsoft, Nadella said it was a "tremendous honor and privilege to have worked with and learned from Bill over the years."
"Bill founded our company with a belief in the democratizing force of software and a passion to solve society’s most pressing challenges," he said. "And Microsoft and the world are better for it."
The Microsoft board will consist of 12 members. A replacement for Gates wasn't named.
The Associated Press contributed to this report.