Microsoft CEO Steve Ballmer, who succeeded founder Bill Gates in the job, will retire within the next 12 months.
The world's biggest software company did not name a successor.
Microsoft Corp's stock shot up 9% in pre-market trading following the news.
Mr Ballmer, 57, first met Microsoft founder Bill Gates in 1973 while they were living down a dormitory hall from each other at Harvard University.
He joined Microsoft in 1980 to bring some business discipline and salesmanship to a company that had just landed a contract to supply an operating system for a personal computer that IBM would release in 1981.
Mr Ballmer did the job so well that he would become Mr Gates' sounding board and succeed him as CEO in 2000.