Bezos will become executive chair of the company later this year.
He will become executive chairman, a move he said would give him "time and energy" to focus on his other ventures.
Mr Bezos, the world's richest man, will be replaced by Andy Jassy, who currently leads Amazon's cloud computing business.
The change will take place in the second half of 2021, the company said.
"Being the CEO of Amazon is a deep responsibility, and it's consuming. When you have a responsibility like that, it's hard to put attention on anything else," Mr Bezos said in an letter to Amazon staff on Tuesday.
"As Exec Chair I will stay engaged in important Amazon initiatives but also have the time and energy I need to focus on the Day 1 Fund, the Bezos Earth Fund, Blue Origin, The Washington Post, and my other passions."
"I've never had more energy, and this isn't about retiring. I'm super passionate about the impact I think these organizations can have," he added.
Higher public profile
Mr Bezos, 57, has led Amazon since its start as an online bookshop in 1994. The firm now employs 1.3 million people globally andhas its hand in everything from package delivery and streaming video to cloud services and advertising. He's amassed a fortune of $196.2bn, according to Forbes' list of billionaires.
Itsaw its already explosive growth skyrocket last year, as the pandemic prompted a surge in online shopping.
The firm reported $386bn (£283bn) in sales in 2020, up 38% from 2019. Profits almost doubled, rising to $21.3bn.
In announcing the plans, Mr Bezos said he would continue to focus on new products and early initiatives.
"When you look at our financial results, what you're actually seeing are the long-run cumulative results of invention," he said. "Right now I see Amazon at its most inventive ever, making it an optimal time for this transition."
The shake-up comes as Mr Bezos has taken on an increasingly public profile.
He has endured a public divorce, become a target for labour and inequality activists, and poured his wealth into other businesses, such as space exploration firm Blue Origin and the Washington Post newspaper.
Amazon also faces increasing scrutiny from regulators, who have questioned its monopoly power. And its dominance in cloud computing is being increasingly challenged by other tech firms, such as Microsoft and Alphabet, parent company of Google and YouTube.
Mr Bezos's decision to hand over the day-to-day operation of the company came as a surprise. But investors appeared unfazed, with little change in the firm's share price in after-hours trade.
In a call with analysts to discuss the firm's financial results, Amazon chief financial officer Brian Olsavsky said: "Jeff is not leaving, he is getting a new job... The board is super active and important in Amazon's success story."
Mr Jassy, a Harvard graduate, has been with Amazon since 1997 and helped develop Amazon Web Services, which has long been seen as the profit engine of the company.
"Andy is well known inside the company and has been at Amazon almost as long as I have. He will be an outstanding leader, and he has my full confidence," Mr Bezos said.
Sophie Lund-Yates, analyst at Hargreaves Lansdown, said it was "no accident" that Amazon is tapping the head of the cloud business to lead the company.
This is a real surprise. But you have to remember that Jeff Bezos himself is worth nearly 200 billion dollars.
And when you're that rich imagine what you can do. Jeff Bezos has some pretty lofty ambitions outside of Amazon.
His Blue Origin company wants to "build a road to space". He's also sunk $10bn into Earth Fund, designed to help combat the effects of climate change.
Oh, and he also owns the Washington Post.
How will Amazon cope? Well, importantly, he's not leaving. As executive chair and founder he'll still exercise huge power over the company.
However, stepping back will inevitably mean less influence.
His replacement - Andy Jassy - had had been running Amazon Web Services, Amazon's booming cloud business division
His rise to the top underscores how important this business has become to Amazon.
Another top executive, Jeff Wilke, who led the firm's consumer business, announced his retirement last year.
Amazon Web Services "continued to shine in the quarter, and now accounts for a more meaningful chunk of sales. The potential here is huge, and the scalable benefits that come with it should have ears pricking up," she said.
Overall sales at the company rose 44% in the last three months of the year to $125.6bn, boosted in part by renewed lockdowns in some parts of the world as well as a later date for the firm's "Prime Day", when the firm tries to drive sales with a slew of discounts.
Amazon Web Services saw sales rise 28% to $12.7bn.
Carolina Milanesi, an analyst at Creative Strategies, wrote on Twitter that the "huge" announcement showed how central cloud services are to Amazon's business.
But she added that she did not think Bezos was "done making an impact on the future of the company".
Critics of the firm reacted to the announcement similarly.
"Do not be fooled by Amazon. Jeff Bezos is still in a position of immense power as Executive Chair," said Public Citizen, a US-based consumer rights activist group. "This abusive, predatory monopoly still needs a complete overhaul."