Yudof, 68, said he plans to end his tenure on Aug. 31, about five years after he became head of the 10-campus system. The former law professor plans to return to teaching law on the UC Berkeley campus.
"The prior 18 months brought a spate of taxing health issues," Yudof said in a statement. "Though these challenges have been largely overcome, I feel it is time to make a change in my professional lifestyle."
In June 2008, Yudof replaced Robert Dynes as leader of the UC system, one of the world's leading research universities with about 220,000 students. He was chancellor of the University of Texas system from 2002 to 2008 and president of the University of Minnesota system from 1997 to 2002.
Yudof has led the University of California through a tumultuous period, when deep cuts in state funding led to sharp tuition hikes, cuts to academic programs and rowdy campus protests.
The university's finances are expected to stabilize. In his 2013-2014 budget, Gov. Jerry Brown has proposed increasing state funding for UC by $250 million, an increase made possible by the November passage of his Proposition 30 tax initiative.
"Now, it appears the storm has been weathered. We are not fully in the clear, but we are much closer than we were even a few months ago," Yudof said.