The announcement was made in a letter on the royal family’s website written by Juan Carlos for his son, King Felipe VI.
In the letter, Juan Carlos said he made the decision against the backdrop of "public repercussions of certain episodes of my past private life."
Juan Carlos said he didn’t want to make his son's role difficult, adding that "my legacy, and my own dignity, demand that it should be so." Juan Carlos' current whereabouts were not known.
Spain's prime minister recently said he found the developments about Juan Carlos – including investigations in Spain and Switzerland – "disturbing."
Since Spain's Supreme Court opened its probe earlier this year, Spanish media outlets have published damaging testimony from a separate Swiss investigation into millions of euros that were allegedly given to Juan Carlos by Saudi Arabia's late King Abdullah.
The reports accused Juan Carlos of then transferring a large amount to Corinna Larsen, a Danish-German businesswoman and former companion, in what investigators are considering as a possible attempt to hide the money from authorities.
The 82-year-old former king is credited with helping Spain peacefully restore democracy after the death of dictator Francisco Franco in 1975.
But marred by scandals in the later years of his reign, Juan Carlos in 2014 abdicated in favor of his son Felipe VI, losing the immunity from prosecution Spain's constitution grants to the head of state.
After media reports claimed Felipe was a beneficiary of an offshore account holding the equivalent of a $76 million from Saudi Arabia to Juan Carlos, Felipe renounced any future personal inheritance he might receive from the former king.
The royal house has denied that Felipe had any knowledge of his father's alleged financial irregularities. The royal website said in a statement that Felipe respected his father's decision.
Felipe acknowledged the historic importance of his father's reign, the statement said, but also "reaffirmed the principles and values on which it stood, in the framework of our constitution and the rest of our legal system."
The decision to leave Spain means Juan Carlos will vacate the 17th-century Zarzuela palace in Madrid, his home for more than 50 years. He moved there after marrying the former queen, Sofia, in 1963.
The Associated Press contributed to this report.