But Italian newspapers claim that a sex scandal, in-fighting and corruption within the Vatican were behind his decision.
Adding to the Vatican's woes are demands that two Cardinals not be allowed to take part in the conclave to elect a new Pope.
Correspondent: Philip Williams
Speakers: Pope Benedict XVI; Cardinal Cormac Murphy-O'Connor, former Archbishop of Westminster; Cardinal Keith O'Brien
PHILIP WILLIAMS: With St Peter's Square packed with tens of thousands of the faithful, Pope Benedict took to the balcony for his final Sunday blessing as Pontiff.
BENEDICT XVI: I offer warm greeting to all the English speaking visitors present for this Angelus prayer. I thank everyone for the many expressions of gratitude, affection, closeness and prayer which I have received in these days.
PHILIP WILLIAMS: But even before he leaves, there are stories of dark forces within the Vatican - warring factions and illicit sexual encounters.
Italy's La Republica newspaper says a red bound two volume report on nefarious activities within the Vatican walls convinced the Pontiff it was time to go.
This has been dismissed by the Pontiff's media people, but it's a story that refused to disappear ahead of the conclave of 117 cardinals who will decide amongst them who has the right qualities to be the next pope.
One of those is Britain's only representative to the conclave, Cardinal Keith O'Brien. He is the subject of allegations reported in the Observer newspaper that he made inappropriate contact or approaches with four young priests back in the 1980s.
The four, one of whom since left the priesthood, have complained to the Vatican's representative in Britain and have called on the Cardinal to resign immediately.
Cardinal O'Brien has denied the allegations and is seeking legal advice. He missed a church service in Scotland today and has not publicly commented on the allegations. But the former Archbishop of Westminster, Cardinal Cormac Murphy-O'Connor, said this:
CORMAC MURPHY-O'CONNOR: I was very sad to hear that, the Cardinal's denied the allegations.
REPORTER: He has denied the allegations.
CORMAC MURPHY-O'CONNOR: So I think we'll just have to see how that pans out. And these allegations have not been proved in any way. So I think he will have to decide whether he goes or not.
PHILIP WILLIAMS: Late last week Cardinal O'Brien surprised everyone, coming out in favour of allowing priests to marry and at that time he said this about the US Cardinal Roger Mahony who is facing a petition calling on him not to take part in the conclave over allegations he helped priests accused of abuse to escape detection.
KEITH O'BRIEN: We all know and I think we all acknowledge that sometimes, if someone has erred in some way or another, it doesn't stop their judgement in other matters being perfectly clear and whether or not they're deserving of the right to take part in a papal election.
PHILIP WILLIAMS: Whoever is elected pope will be left with in no doubt the troubles and scandals that have dogged Pope Benedict's time will not disappear with him.