The former Liberal Democrat leader, who steadied the ship after the shock departure of Charles Kennedy in 2006, is expected to get a seat in the House of Lords after leaving the Commons at the next general election.
Unlike his contemporary, ex-Chancellor Ken Clarke, 73, who last week announced he would stand again in 2015, it is thought the MP for North East Fife finds the prospect of being in his 80th year by the end of the next parliament not appealing.
Sir Menzies said: "It's been an enormous privilege to have been an MP for 26 years and to represent such a wonderful constituency as North East Fife.
"My wife and I have made many friends and have been supported by constituents of all political persuasions and none.
"It is always a regret to begin the process of retiring from the House of Commons but I believe now is the time to start."
In a letter to Deputy Prime Minister Nick Clegg, the 72-year-old backbencher said he had "reached the conclusion that now would be the right time to step down and to allow someone else to have the opportunity to serve the people of North East Fife".
He said he would maintain his links with the constituency through positions such as his chancellorship of St Andrews University.
He told Mr Clegg, who replaced him as leader in 2007: "Between now and 2015 I will maintain my efforts to be as effective a representative of my constituents and their interests as I can and to the best of my ability support yourself, our party and its interests."
A former barrister, Sir Menzies once held the UK 100 metres record and competed in the 1964 Olympic Games.
In 1987 he entered the UK Parliament as a Liberal MP at his fifth attempt and became a Liberal Democrat on the party's creation the following year.
He served on his party's frontbench, most prominently as foreign affairs spokesman, for the majority of his parliamentary career. His stint as leader was marked by poor poll ratings and he stepped down after just 19 months.
In 2009, he failed to become Commons Speaker. The post was filled by Conservative John Bercow.
Most recently, Sir Menzies has served on the Commons Foreign Affairs Committee and the parliamentary Intelligence and Security Committee.
Last night, Mr Clegg described his colleague as a "towering presence in British politics for the past three decades" and who had "served this country and our party with unparalleled distinction".
"Most people would be satisfied with just one outstanding career but Menzies Campbell has had three - as an Olympic athlete, a renowned QC, and a leading politician. I have relied for a long time on Ming's enormous wisdom and knowledge and his retirement from Westminster is a sad day for me, my party and British politics."