"Every good fighter knows when to hang up the gloves," Hatch, 83, said in a video posted to his Twitter account.
Hatch's decision comes after months of speculation about his future in the Senate. President Donald Trump has openly urged the senator to run for an eighth term.
“You are a true fighter, Orrin, I have to say,” Trump said at an event in Salt Lake City, Utah’s capital last month. “We hope you will continue to serve your state and your country in the Senate for a very long time to come.”
Hatch revealed he made the decision to not seek re-election after "much prayer and discussion with family and friends."
"When the president visited Utah last month, he said I was a fighter. I've always been a fighter," Hatch said in his announcement.
Hatch chairs the Senate Finance Committee and was a pivotal factor in pushing through a major overhaul of the U.S. tax system in December.
Hatch's announcement also opens the door for Republican Mitt Romney to run for his seat. Romney, the former governor of Massachusetts and 2012 Republican presidential nominee, has signaled he would run for the seat if Hatch were to retire.
White House press secretary Sarah Sanders said Tuesday that Trump is "very sad" to see Hatch leave and that no decisions have been made yet on campaigning for a potential Utah Republican nominee. In December, the president publicly expressed his desire that Hatch continues to serve "for a very long time."
"Congratulations to Senator Orrin Hatch on an absolutely incredible career," Trump tweeted later in the day Tuesday, after the press briefing. "He has been a tremendous supporter, and I will never forget the (beyond kind) statements he has made about me as President. He is my friend and he will be greatly missed in the U.S. Senate!"
Senate Majority Leader Mitch McConnell, R-Ky., reacted to Hatch's announcement with a written statement Tuesday afternoon, saying that the Senate was losing one of its "most gifted legislators."
"Orrin’s long list of accomplishments means he will depart as one of the most productive members ever to serve in this body," said McConnell. "But even more than what Orrin did, his friends and colleagues here will remember how he did it. We’ll remember the unfailing energy, kindness, and straightforward honesty that he brought to work every day."
The news of Hatch's announcement comes on the heels of a blistering editorial published in Utah’s most prominent newspaper last week. The Salt Lake Tribune editorial said Hatch should step down and “call it a career” for his “utter lack of integrity that rises from his unquenchable thirst for power.”
The editorial subsequently characterized his advocacy for changes to the Bears Ears and Grand Staircase-Escalante national monuments, which the Trump administration severely curtailed, as a "dismantling."