"After eight, possibly soon to be nine, consecutive world titles, Sebastien Loeb and (co-pilot) Daniel Elena will not be defending their title in 2013," Citroen Racing said on their website (www.citroen-wrc.com).
"They will therefore be taking part in a partial racing programme next year, starting at the legendary Rally Monte Carlo, which opens the 2013 season between 15th and 20th January."
The 38-year-old Frenchman, who has always said he wanted to quit rallying at his peak, leads the world championship standings on 219 points, 61 ahead of his Citroen team mate Mikko Hirvonen from Finland, with three races to go.
Hirvonen will become Citroen's main driver next term with an announcement in due course about the second crew that will compete in the absence of Loeb. A Citroen DS3 WRC will also be entrusted to the United Arab Emirates driver Khaleed Al-Qassimi.
Loeb, who has had 74 wins in his career, will continue competing with Citroen, who had agreed a partnership with Abu Dhabi in order to cut their costs, the French carmaker said.
"In these tough economic times, Citroen has taken the view that it is essential for it to remain involved in motorsport... At the same time, it was equally important to find a way of reducing the brand's financial commitment to the team's operating costs," Citroen said.
PSA Peugeot-Citroen announced restructuring plans in July which involve 8,000 job cuts and the closure of one its biggest plants in France.
"In this context, we are particularly proud to welcome Abu Dhabi on board," Citroen Racing Team principal Yves Matton was quoted as saying on the website.
"This partnership will provide us with the means of continuing our programme and entering three DS3 WRCs in 2013."
Citroen have won seven team championships with Loeb, whose eight consecutive titles constitute a record in all motor racing competitions.
The Frenchman won his first race in 2002 in Germany, where he eventually clinched nine victories, a world record for a rallying event.
Loeb, who combines an aggressive style with a scientific and efficient approach to driving, has been one of the most popular figures in French sport for years.
Regarded by the public as a simple, honest and hard-working man, he was voted France's favourite sports personality three times in an annual poll conducted for daily newspaper L'Equipe.
Loeb set up his own team with a friend and successfully competed in the Porsche Matmut Carrera Cup, an event solely for the German sports cars, earlier this year.
"Rallying represents a big part of my life, something I will always love and it is for that reason I will continue with it," he said at the time.
"But in years to come, when I have a little more free time, I want to discover a new universe."
Loeb, who also raced twice at Le Mans, had been considering entering the World Touring Car Championship in 2014 with Citroen, the company said.