The 55-year-old is expected to focus on philanthropy and education after he steps down.
Alibaba chairman Jack Ma stepped down from the e-commerce giant on Tuesday, marking the end of an era for the firm.
He co-founded Alibaba in 1999 and it has become one of the world's biggest internet firms.
Ma's success and colourful style has made him one of China's most recognisable businessmen.
Daniel Zhang, currently Alibaba's chief executive, will replace him as executive chairman.
The company is now valued at $480bn and Ma is China's richest man, with a net worth of $38.6bn according to Forbes.
He is also the first founder among a generation of prominent Chinese internet entrepreneurs to step down from his company.
"I think it will be very hard to replace somebody like Jack Ma," said Rebecca Fannin, author of a book on China's technology titans.
"He is one of a kind. He is the Steve Jobs of China."
With no background in computing, Ma co-founded Alibaba in his apartment, having convinced a group of friends to invest in his online marketplace.
Born to a poor family in the eastern Chinese city of Hangzhou, Ma began his career as an teacher.
He bought his first computer at the age of 33 and was surprised when no Chinese beers turned up in his first online search for "beer".