The 85-year-old pope said his strength had deteriorated over recent months "to the extent that I have had to recognize my incapacity to adequately fulfill the ministry entrusted to me".
"For this reason, and well aware of the seriousness of this act, with full freedom I declare that I renounce the ministry of Bishop of Rome, Successor of Saint Peter," he said according to a statement from the Vatican.
A Vatican spokesman said the pontiff will step down from 1900 GMT on February 28, leaving the office vacant until a successor is chosen.
In the Catholic Church history, five popes have abdicated, freely or under obligation.
Joseph Aloisius Ratzinger was elected pope on 19 April 2005.
With regard to papal resignations the Code of Canon Law states that if the Roman Pontifex resigns from his office, is required for validity that his resignation be freely made and properly manifested, but it is not necessary that it be accepted by anyone.
Following is Pope Benedict's declaration during Monday Consistory for three canonizations:
I have convoked you to this Consistory not only for the three canonizations, but also to communicate to you a decision of great importance for the life of the Church. After having repeatedly examined my conscience before God, I have come to the certainty that my strengths, due to an advanced age, are no longer suited to an adequate exercise of the Petrine ministry.
I am well aware that this ministry , due to its essential spiritual nature, must be carried out not only with words and deeds, but no less with prayer and suffering. However in today's world, subjected to so many rapid changes and shaken by questions of deep relevance for the life of faith, in order to govern the bark of Saint Peter and to proclaim the Gospel, both strength of mind and body are necessary, strength which in the last few months, has deteriorated in me to the extent that I have had to recognize my incapacity to adequately fulfill the ministry entrusted to me.
For this reason, and well aware of the seriousness of this act, with full freedom I declare, that I renounce the ministry of Bishop of Rome, Successor of Saint Peter, entrusted to me by the Cardinals on 19 April 2005, in such a way, that as from 28 February 2013, at 20:00 hours, the See of Rome, the See of Saint Peter will be vacant and a Conclave to elect the new Supreme Pontiff will have to be convoked by those whose competence it is.
Dear Brothers, I thank you most sincerely for all the love and work with which you have supported me in my ministry and I ask pardon for all my defects. And now, let us entrust, the Holy Church to the care of Our Supreme Pastor, our Lord Jesus Christ, and implore his holy Mother Mary, so that she may assist the Cardinal Fathers with her maternal solicitude, in electing a new Supreme Pontiff.
With regard to myself, I wish to also devotedly serve the Holy Church of God in the future through a life dedicated to prayer.