O'Toole, who turns 80 on Aug. 2, said in a statement Tuesday that his career on stage and screen fulfilled him emotionally and financially, bringing "me together with fine people, good companions with whom I've shared the inevitable lot of all actors: flops and hits."
"However, it's my belief that one should decide for oneself when it is time to end one's stay," he said. "So I bid the profession a dry-eyed and profoundly grateful farewell."
In retirement, O'Toole said he will focus on the third volume of his memoirs.
An eight-time Academy Award nominee who never won Hollywood's top acting honor, O'Toole shot to screen stardom 50 years ago in the title role of "Lawrence of Arabia," which earned seven Oscars, including best picture and director for David Lean.
O'Toole's grand performance as British adventurer T.E. Lawrence brought him his first best-actor nomination but set him on an unenviable path of Oscar futility. His eight losses without a win is a record among actors.
The honors stacked up quickly as O'Toole received Oscar nominations for 1964's "Becket," 1968's "The Lion in Winter," 1969's "Goodbye, Mr. Chips," 1972's "The Ruling Class," 1980's "The Stunt Man" and 1982's "My Favorite Year."
In the latter film, O'Toole played a dissolute actor preoccupied with drink and debauchery, seemingly a tailor-made role for a star known in his early years for epic carousing with such fellow partiers as Richard Burton, Richard Harris and Peter Finch.
O'Toole went into acting after serving in the Royal Navy, studying at London's Royal Academy of Dramatic Art. His early stage successes included the lead in "Hamlet" and Shylock in "The Merchant of Venice."
He was among a wily new breed of young British stage actors who soon would rise to Hollywood stardom.
"There was a group of us working-class actors, Peter O'Toole, Albert Finney, everybody, and we changed the way things were," Michael Caine said last weekend in an interview for his latest film, "The Dark Knight Rises."
Caine recalled being O'Toole's understudy in playwright Willis Hall's "The Long and the Short and the Tall," which opened in London in 1959.
"He did an incredible performance and he got 'Lawrence of Arabia,' and then I took it on tour," said two-time Oscar winner Caine.
In 2003, at age 70, O'Toole received an honorary Oscar, often given as a consolation prize for acclaimed actors and filmmakers who never managed to win Hollywood's top award.
The honorary Oscar came 20 years after his seventh nomination, for "My Favorite Year." By then it seemed a safe bet that O'Toole's prospects for another nomination were slim. He was still working regularly, but in smaller roles unlikely to earn awards attention.
O'Toole graciously accepted the honorary award, quipping, "Always a bridesmaid, never a bride, my foot," as he clutched his Oscar statuette.
O'Toole nearly turned down the award, sending a letter asking that the Academy of Motion Picture Arts and Sciences hold off on the honorary Oscar until he turned 80.
Hoping another Oscar-worthy role would come his way, O'Toole wrote: "I am still in the game and might win the bugger outright."
O'Toole was still in the game. He earned his eighth best-actor nomination for 2006's "Venus," in which he played a lecherous old actor consigned to roles as feeble-minded royals or aged men on their death beds.
"If you fail the first time, try, try, try, try, try, try, try again," O'Toole said in a statement on nominations day.
Unfortunately for O'Toole, he failed again. The best-actor prize went to Forest Whitaker for "The Last King of Scotland."
Still, O'Toole had the esteem of Hollywood from that honorary prize a few years earlier.
"I have my very own Oscar now to be with me until death us do part," O'Toole told the academy crowd that night.