Miller, who had been at the center of the recent CIA leak case that resulted in the indictment and resignation of a White House aide, had been in negotiations with the Times for more than two weeks. Her lawyers negotiated a severance package, the terms of which were not disclosed. As part of the agreement, the Times will publish a letter from Miller explaining her position, the paper noted on its Web site.
The 57 year old leaves the Times after serving for many years as an investigative and national security correspondent. She has written four books and was a member of a team that won the 2002 Pulitzer Prize for explanatory journalism for reporting on the growing threat of terrorist network al-Qaida and its leader Osama bin Laden.
"In her 28 years at the Times, Judy participated in some great prize winning journalism," Bill Keller, Times executive editor, wrote in a staff memo Wednesday afternoon.
Times publisher Arthur Sulzberger Jr. added, "We are grateful to Judy for her significant personal sacrifice to defend an important journalistic principle. ... I respect her decision to retire from the Times and I wish her well."
Miller went to jail last summer for refusing to disclose the source that had provided her with the name of an undercover CIA agent. That source turned out to be Vice President Dick Cheney's former chief of staff I. Lewis "Scooter" Libby. She revealed his name only after receiving permission from Libby.
Libby was charged on Oct. 28 with obstructing justice, perjury and lying in a two-year investigation that involved several journalists and high-ranking White House officials.
Many in the media, including Times colleague Maureen Dowd, criticized Miller for stories she wrote on weapons of mass destruction in Iraq that turned out to be based on faulty information supplied by Iraqi exiles.
The Times' Web site said that in her letter, Miller wrote that she had "become a lighting rod for public fury over the intelligence failures that helped lead our country to war" and wanted to leave the paper because she had "become the news."