It will be exactly 52 years to the day when she became queen on 14 January, the official day of her resignation.
"I will leave the throne to my son, Crown Prince Frederik," said the queen.
In 1972, her father, King Frederik IX, passed away, and the 83-year-old has been the sole reigning queen in the world and the longest serving present monarch in Europe ever since.
Crown Prince Frederik, who is 55 years old, will not be formally crowned as is customary in British royal history. On the same day, his accession will instead be declared from Copenhagen's Amalienborg Castle.
He will succeed her as monarch of Denmark and serve as chief executive in the constitutional monarchy that she has presided over, together with Greenland and the Faroe Islands.
His wife, Princess Mary, who was born in Australia, will marry into the Danish royal family.
After some thought following her back surgery in early 2023, Queen Margrethe made the choice public.
"The surgery naturally gave rise to thinking about the future - whether the time had come to leave the responsibility to the next generation," according to her. She went on to say, "I have decided that now is the right time," before thanking the people of Denmark for their support spanning many years.
Prime Minister Mette Frederiksen thanked the queen for her service "lifelong dedication and tireless efforts for the Kingdom."
"Although the duty and position of regent has been handed down for more than 1,000 years, it is still difficult to understand that the time has now come for a change of throne," she said in a statement.
"Many of us have never known another regent. Queen Margrethe is the epitome of Denmark and throughout the years has put words and feelings into who we are as a people and as a nation."
Queen Margrethe II and Queen Elizabeth II in the year 2000
Queen Margrethe is a popular figure in Denmark, and many Danes had expected her to remain on the throne until her death.
"She is to us what Queen Elizabeth was to you," Danish journalist Tine Gotzsche told the BBC. Queen Margrethe attended the funeral of Queen Elizabeth II in 2022, and they celebrated their respective jubilees in the same year.
She had not been expected to become Queen when she was born. But when she was 13, Danish law changed to allow women to take the throne.
Queen Margrethe reflected that she was inspired by the late British Queen "that I must somehow understand that I must dedicate my life to my nation like she has done, and in that way she has been very important to me." The pair had been the world's only remaining female sovereigns before Queen Elizabeth's death. Elizabeth reigned for 70 years.
Renowned for her penchant for smoking and refusal to use mobile phones
Some also consider her the world's longest reigning monarch. The Sultan of Brunei has been on the throne for longer, but his country only gained independence in 1984.
She is also the longest-serving monarch in Danish history, after surpassing King Christian IV, of Denmark and Norway, earlier this year.
Affectionately known as Daisy, Queen Margrethe is known for her smoking habits and rejection of mobile phones and the internet - declaring herself "very happy" without them.
Gotzsche said the Danish royal transition is a moment of mixed celebration and sadness.
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