Ma will step down in exactly one year on Sep 10, 2019, and current Alibaba Chief Executive Daniel Zhang will replace him as chairman.
Mr Ma, who has a current net worth of $36.6bn, will remain a director on Alibaba's board until its annual shareholder meeting in 2020.
He said Mr Zhang, who has been with Alibaba for eleven years, had demonstrated "superb talent" since taking over as chief executive.
Mr. Zhang had previously served as Taobao's chief financial officer, president of Tmall.com and as Alibaba's chief operating officer before succeeding Jonathan Lu as chief executive. "But for a company of Alibaba's size, it's a process that will take 10 years to complete", he said.More news: 2 players kneel for anthem, Kaepernick tweets to thank them
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He is also known for his eccentric personality and has donned wigs and costumes to perform highly choreographed pop routines at company events.
Since handing over the CEO role, Ma has concentrated on philanthropy and promoting Alibaba internationally at business and political events.
Last year Ma invested 300 million yuan ($45m) in a rural education project in China.
Mr Ma gave up the title of Alibaba CEO in 2013 but remains a pivotal figure within the company as well as its most recognisable face.
Alibaba saw sales at its e-commerce business swell 61% in the latest reported quarter, but its profit margins have been squeezed by big-ticket investments as it battles to maintain its dominant position in e-commerce and payments.