Speaking in New York, the star said he would say goodbye to fans with a series of 300 dates spanning three years.
"I always thought I was going to be like Ray Charles, BB King - on the road forever," he said.
"My priorities have changed. We had children and I changed our lives. That doesn't mean to say I'm not going to be creative. but I'm not going to travel."
The star denied reports in the press that he was retiring due to ill health.
"Last year I picked up an infection and I was very ill and it knocked me sideways. But I still did 96 shows.
"Believe me - if you ever do 300 shows, you're not in ill health."
Sir Elton has sold more than 300 million records over his career and is one of the world's most in-demand live performers.
Last year, he was forced to cancel nine shows in Las Vegas and California because of a bacterial infection he contracted during a South American tour.
Sir Elton's management said the "potentially deadly" infection forced him to spend two nights in intensive care in April and to cancel concerts in the US.
It was not the first time ill health had stopped the star from stepping on stage.
In 1999, he was fitted with a pacemaker when doctors found an irregular heartbeat, while in 2013 the star cancelled a headline slot at London's Hyde Park after being diagnosed with appendicitis.
However he played 96 shows during 2017, including dates in Europe and Australia, as well as his demanding Las Vegas show, The Million Dollar Piano.
And, while he has taken the decision to reduce his workload, Sir Elton is still juggling several major projects.
The star is due to perform a duet with Miley Cyrus at Sunday's Grammy Awards and will host a special concert in his honour at Madison Square Garden on Tuesday. Guest stars will include Sam Smith, Chris Martin, Kesha, John Legend and Keith Urban.
He is currently working on a Broadway musical based on The Devil Wears Prada, as well as the live action version of Disney's The Lion King and the animation Sherlock Gnomes, produced by his own production company.
But while the star may be plotting his final world tour, it is unlikely he will stop playing live altogether.
"Elton must never stop performing," his husband David Furnish told Music Week last year.
"Some people relish the idea of a retirement where they do nothing [but] for Elton that would be purgatory."
However, he added: "I think given our commitments to our kids and our family - and now our boys are nearly seven and five and at that point where they need you present more than ever - it's important we're there to support them. So that will have an impact on what we do."
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