The decision will give President Barack Obama his first chance to name someone to the nation's highest court.
The president interrupted his press secretary's daily briefing at the White House to tell reporters he had just spoken with Souter on the phone about his departure. Mr. Obama said he will nominate an individual who is "dedicated to the rule of law" as his replacement.
No reason was publicly given for Souter, 69, to leave the bench, but his friends told media organizations that he often spoke of his intentions to be the court's first retirement if Mr. Obama won the election last fall. He also told friends he looked forward to returning to New Hampshire while he was young enough to enjoy climbing mountains and other outdoor activities, reported The New York Times.
NPR's Nina Totenberg, who broke the story Thursday, wrote on NPR's Web site: "He has made clear to friends for some time that he wanted to leave Washington, a city he has never liked, and return to his native New Hampshire. Now, according to reliable sources, he has decided to take the plunge and has informed the White House of his decision."
Souter had been the only justice not to pick clerks for next fall's term, which fueled media rumors of his plans to retire and speculation about possible successors.
Potential candidates included federal appeals court judges Diane Pamela Wood and Sonia Sotomayor, Harvard Law School Dean Elena Kagan and former Yale Law School Dean Harold Hongju Koh. Some governors also were mentioned in published reports, including Deval Patrick of Massachusetts, Christine Gregoire of Washington and Jennifer Granholm of Michigan, according to news outlets.
President Obama likely will choose a liberal justice, similar to Souter, keeping the court's balance status quo. The Senate will have until the Supreme Court's next term begins in October to hold confirmation hearings and vote on Souter's successor.
It would be the first Supreme Court justice named by a Democratic president since 1994, when Bill Clinton nominated Justice Stephen Breyer.
For 18 years, Souter reportedly worked seven days a week through most of the Supreme Court's October-to-July terms, staying at his office for more than 12 hours a day, according to the Associated Press.
He didn't participate in Washington, D.C.'s social scene and once told acquaintances he had "the world's best job in the world's worst city."
"When the term of court starts I undergo a sort of annual intellectual lobotomy and it lasts until the following summer when I sort of cram what I can into the summertime," Souter said during a rare public speech in March before humanities teachers at the American Academy of Arts and Sciences, reported the AP.
A graduate of Harvard Law School, Souter was appointed to the court in 1990 by President George H.W. Bush after just a few months as a federal appeals court judge, but with years of experience as a prosecutor, attorney general, trial judge and state Supreme Court justice in New Hampshire.
Liberals were concerned that his appointment by an abortion opponent would help spell the end of the guarantee of abortion rights, but in 1992 Souter voted to uphold Roe v. Wade. In the end, Souter ended up being one of the court's most liberal justices.
Souter was also one of the four dissenters in the 2000 decision in Bush v. Gore that sealed the presidential election for George W. Bush.