Chief executive Pierre Blouin will stay on until a new CEO has been appointed and will help with the transition process.
The telecom company says both internal and external candidates will be considered for the top job.
Under Blouin's leadership, MTS had tried to sell its business unit, Allstream, but Ottawa blocked a $520-million deal to sell it last year.
Federal Industry Minister James Moore, acting under national security provisions of the Investment Canada Act, rejected the proposal to sell Allstream to Egyptian investment group Accelero Capital.
The company wasn't able to line up another buyer for Allstream, which provides services such as Internet and telephone to businesses.
Canaccord Genuity analyst Dvai Ghose said Blouin, CEO since December 2005, has operated under very tough conditions. But he noted that MTS has maintained sector leading wireless and wireline market share in Manitoba and is enjoying the best broadband subscriber growth of any major Canadian telecom or cable company.
"We will be sad to see Blouin leave," Ghose said in a note.
Ghose also said the announcement of Blouin's retirement suggests that a near-term sale of Allstream or the telecom division is unlikely and that the environment remains challenging for MTS.
"In summary, we believe that Blouin's departure, while no doubt driven by personal factors, may have a negative impact on investor sentiment. That being said, we see limited downside in MTS shares due to the current 5.6 per cent dividend yield and our view that a further DPS (dividend) cut is unlikely."