Levine has struggled with illness in recent years, including Parkinson's disease, and the Met cited health reasons as the reason for his departure, adding that it plans to announce a new musical director in the coming months.
His retirement marks an end of an era at the Met. Levine has served as a link to the present from opera's heyday years of the 1970s and 1980s when such stars as Leontyne Pryce and Joan Sutherland enjoyed global followings.
Levine conducted performances of the famed "Three Tenors" who popularized opera in the 1980s and 90s. The landmark tour, with Luciano Pavarotti, Jose Carreras and Placido Domingo, brought opera closer to the masses and into vast venues such as Wembley Stadium in London and Dodger Stadium in Los Angeles.
In more recent years, he has played a major role in nurturing newer and up-and-coming stars such as the soprano Angela Meade and the tenor Matthew Polenzani.
"There is no conductor in the history of opera who has accomplished what Jim has achieved in his epic career at the Met," said Peter Gelb, the Met's general manager.
"We are fortunate that he will continue to play an active and vital role in the life of the company when he becomes music director emeritus at the end of the season."
Health problems have hung over Levine throughout the current season.
The Met came close to announcing his retirement earlier this year, but pulled back in hopes that a new course of medical treatment could extend his tenure, according to reports.
A New York Times review of Verdi's "Simon Boccanegra" this month praised Levine's deep knowledge of the score, but bemoaned a "tentative" quality to his conducting. The review also said the opera's star, Domingo, was well past his prime.
"When is it time for a great artist to retire?" the review said. "This delicate question hovers over the Metropolitan Opera's revival of Verdi's 'Simon Boccanegra'."
- Met at crossroads -
Levine's departure comes as the Met faces challenges to stay financially robust and keep filling its vast 4,000-seat theater in an era increasingly dominated by smartphones, popular culture and newer music forms, such as hip-hop.
Popular operas like "Madame Butterfly" still sell well, but weekday performances of less-known works are often dotted with empty seats.
A low point came in 2009 when the Met put up as collateral a pair of famed Marc Chagall murals for a loan. The Met also narrowly escaped a strike ahead of the 2014 season after reaching a deal with unions to ease wage cuts on theater workers and tighten the belt of management.
Through it all, Levine has remained one of the Met's most iconic figures, dubbed "the Maestro" in a March 2015 "60 Minutes" segment that documented his comeback from a spine fracture that took all the feeling from his legs and showed him coaching a young soprano through a heartbreaking aria in Verdi's "Otello."
Levine's struggles with Parkinson's disease and other ailments forced him to take a two-year leave of absence in 2011, after which he conducted from a motorized wheelchair and used a podium that mechanically falls and rises.
He conducted frequently in the 2014-15 season, but withdrew earlier this year from a major new production of Berg's "Lulu" due to health reasons.
Levine plans to complete planned performances in the current season, including remaining performances of "Simon Boccanegra" to be followed by Mozart's "The Abduction from the Seraglio." He will continue to conduct on a scaled-back basis next season, including a revival of Verdi's "Nabucco," also with Domingo.
He also plans to remain in his post as artistic director of the Met's Lindemann Young Artist Development Program, a program he started in 1980 to train young singers.
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