The 34-year-old former England skipper, who began his professional career at Bath in 1998 before moving to Saracens five years ago, believes the time is right to bring his career to an end.
"Very few players have the chance to retire on their own terms," Borthwick told saracens.com.
"Saracens did ask me if I'd like to carry on but I feel that the time is right for me to finish playing at the end of the season.
"That's still a few months away, and I am obviously 100 per cent focused on improving as a player and leading this team to the best of my ability."
Borthwick made 57 Test appearances for England at lock and led Saracens to the 2011 Aviva Premiership title.
Saracens director of rugby Mark McCall said: "Steve has become a Saracens legend, as a leader, as a player, as man who sets the highest standards in everything he does.
"He will be sorely missed in due course but, for now, with Steve at the helm, we are focused on Saturday's match against Sale."