The actor, who first stepped into the Tardis in 2013, will leave the role in the 2017 Christmas special.
Capaldi made the announcement on Jo Whiley’s BBC Radio 2 show.
He said: “One of the greatest privileges of being Doctor Who is to see the world at its best.
“From our brilliant crew and creative team working for the best broadcaster on the planet, to the viewers and fans whose endless creativity, generosity and inclusiveness points to a brighter future ahead.
“I can’t thank everyone enough. It’s been cosmic.”
The actor, 58, will return in the tenth series of the relaunched show, with 12 episodes starting in April, followed by the festive special when the regeneration will take place.
Capaldi’s final series also marks writer and executive producer Steven Moffat’s last.
Moffat said: “For years before I ever imagined being involved in Doctor Who, or had ever met the man, I wanted to work with Peter Capaldi.
“I could not have imagined that one day we’d be standing on the Tardis together.
“Like Peter, I’m facing up to leaving the best job I’ll ever have, but knowing I do so in the company of the best, and kindest and cleverest of men, makes the saddest of endings a little sweeter.
“But hey, it’s a long way from over. Peter’s amazing, fiery, turbulent Doctor is still fighting the good fight, and his greatest adventures are yet to come. Monsters of the universe, be on your guard - Capaldi’s not done with you yet!”
The new series of the BBC show will see the Time Lord joined by new companion Pearl Mackie (Bill) and Matt Lucas (Nardole), with stars including David Suchet and Michelle Gomez making guest appearances.
Director of BBC content Charlotte Moore said: “Peter Capaldi will always be a very special Doctor to me - his adventures through time and space started just as I arrived on BBC One.
“He has been a tremendous Doctor who has brought his own unique wisdom and charisma to the role. But, it’s not over yet - I know the next series is going to be spectacular.”