The 64-year-old German, one of Europe's most successful coaches, said it was the most difficult decision of his career but that he could "live without football."
Hitzfeld, who won the Bundesliga five times with Bayern Munich and twice with Borussia Dortmund, as well as the Champions League with both clubs, took over from Koebi Kuhn in 2008.
His reign began disastrously with a home defeat against Luxembourg in a World Cup qualifier in one of his first games, but they recovered to reach the 2010 World Cup in South Africa.
Those results helped catapult them to seventh in the FIFA rankings and means they will be seeded at the World Cup draw in December, ahead of teams such as Italy and England.
"After the World Cup in Brazil, I will be 65 years old," Hitzfeld told reporters at the Swiss federation's headquarters.
"After 30 years in the strength-sapping world of football, my time has come to stop."
"I can live without football, there are more important things in life and my wife will be happy about this," he added.
However, he will continue his work as a television analyst with a German cable network. "I like doing it, I'm always right," he said.
Hitzfeld has been helped by Switzerland's successful youth development policy, which has also been hailed as an example of successful integration in a country sometimes criticised for its treatment of immigrants.
Almost half the Swiss squad consists of players from immigrant backgrounds, particularly Kosovo. Several, such as Xherdan Shaqiri (Bayern Munich), Blerim Dzemaili, Gokhan Inler and Valon Behrami (all Napoli) have graduated to play with top European clubs.
Hitzfeld has long had connections with Switzerland. He was born near Basel, on the other side of the border, and speaks the local Swiss dialect.
He spent considerable part of his playing career in the country and also began his coaching career there, back in 1983.
Perhaps not surprisingly for a former mathematics teacher, Hitzfeld prepares for matches with geometric precision although he can also think on his feet and find a quick solution when things do not go according to plan.
His management of the players is generally considered excellent, so much so that former Daimler-Chrysler chief Juergen Schrempp once described him as a role model for German business leaders.
For all his success, Hitzfeld's career has also been marked by the spectacular 2-1 loss to Manchester United in the 1999 Champions League final, when his Bayern side led for almost the entire game but capitulated in the dying minutes.
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