Mr Ma is staying on as executive chairman for 12 months to "ensure a smooth transition" before handing over his role to chief executive officer Daniel Zhang, Alibaba said in a statement.
Ma, one of the world's richest men, co-founded Alibaba in 1999 with 18 staff, turning it into a global internet sales and payments behemoth.
It expanded into consumer retailing, online finance and other services, becoming the world's biggest e-commerce company by total value of goods sold across all its platforms. The Hurun Run report, which follows China's wealthy, estimates his net worth at $37 billion.
Alibaba said Ma will remain a member of the group that has a right to nominate a majority of the company's board of directors.
The statement did not specify exactly what Ma planned to do after stepping down but it said he wants to "return to education".
The company said he will pass on the reins to trusted lieutenant Daniel Zhang.
The company, which is battling arch rival Tencent Holdings for pole position in the food delivery market, recently said it will merge units including Ele.me and Koubei and raise funds for the combined business.
Ma, who turned 54 on Monday, will continue to mentor senior management as part of an advisory board called the "Alibaba Partnership".
Ma stepped down as chief executive in 2013.
Alibaba also has investments in sports content, microchips and facial recognition technology and has been positioning itself as a serious player in cloud computing.