Ma helped build it into a $420 billion company with more than 500 million Chinese customers.
Over the course of his tenure, Ma has also become China's richest man with a net worth of more than $40 billion. Monday is his 54th birthday, and the Chinese holiday Teacher's Day, making the announcement particularly timely.
Alibaba group founder and CEO, Jack Ma.
Ma said the move will be "the beginning of an era" and revealed that he may now focus on education, which he "loves". He said he would be spending more of his time and fortune focused on education.
In 2014, he created the Jack Ma Foundation, which has worked to improve education in rural China.
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On one hand, Chinese tech companies are facing increased scrutiny by the Chinese government led by President Xi Jinping, on the other hand, the tech firms are caught in an escalating trade war between the U.S. and China.
Porter Erisman, a former Alibaba employee who made a documentary about the firm, "Crocodile in the Yangtze", said: "What Silicon Valley is known for, he embodies a lot of that with Chinese characteristics - that spirit of openness, risk-taking, innovation".
Alibaba started as an online marketplace for businesses to sell their products to other businesses.
Alibaba's growth and Ma's wealth track changes in modern China, in which a burgeoning urban middle class has more money to spend while authorities allowed large accumulations of wealth, especially when connected to forward-thinking enterprises. Ma's Weibo social media handle is "spokesman for village teachers - Jack Ma".
Alibaba said it couldn't immediately comment on the timing of Ma's retirement.
In an interview with Bloomberg TV this week, Ma signalled he was thinking about focusing more on philanthropy. However, in contrast to the American magnate, he wants to "retire earlier".