The 36-year old bows out of playing as one of the most decorated footballers of his generation, picking up 24 winners medals during his time with the Red Devils
Scholes, who came through the United academy as part of the club's famous group of youngsters in the mid-1990s, played more than 650 times for the Old Trafford outfit and is widely acknowledged as one of the finest English footballers of his generation.
A one club man, Scholes picked up 24 winners medals during his time with the Red Devils, including 10 Premier League wins and two Champions League successes after making his debut in September 1994.
However, having struggled to secure first-team football this season, the 36-year old has opted not to sign a new playing contract at the club but will remain alongside Sir Alex Ferguson in a coaching role.
In a statement released on the club's official site, Scholes said: "I am not a man of many words but I can honestly say that playing football is all I have ever wanted to do and to have had such a long and successful career at Manchester United has been a real honour.
"This was not a decision that I have taken lightly but I feel now is the right time for me to stop playing. To have been part of the team that helped the club reach that 19th title is a great privilege.
"I would like to thank the fans for their tremendous support throughout my career, I would also like to thank all the coaches and players that I have worked with over the years, but most of all I would like to thank Sir Alex for being such a great manager, from the day I joined the club his door has always been open and I know this team will go on to win many more trophies under his leadership."
Ferguson has led the tributes to the former England international, stating that Scholes is an inspirational figure.
He said: "What more can I say about Paul Scholes that I haven't said before. We are going to miss a truly unbelievable player. Paul has always been fully committed to this club and I am delighted he will be joining the coaching staff from next season.
"Paul has always been inspirational to players of all ages and we know that will continue in his new role."
The club's chief executive, David Gill, has also paid tribute to the veteran, saying: "It is a very sad day for Manchester United fans around the world. We all know that Paul was one of the players that came through the ranks of the academy system in the 1990s and has established himself as one of the greatest players to ever wear the United shirt.
"It is very important that the club keeps its association with these great players and we are delighted that Paul will join the coaching staff."