He made the surprise announcement in a televised speech.
Born in 1940, Mr Nazarbayev came to power as first secretary of the Communist Party of Kazakhstan when it was a Soviet republic.
The gleaming futuristic new capital Astana, built in the years since independence, symbolised Mr Nazarbayev's drive to put the country on the map.
The senate chair position is now held by Mr Nazarbayev's loyalist Kassym-Jomart Tokayev, 65, a former prime minister and career diplomat. He said he sees his mission as ensuring the transit of power to a new generation of politicians.
Nazarbayev has no apparent long-term successor.
President Nursultan Nazarbayev of Kazakhstan attends a meeting with U.S. President Donald Trump in the Oval Office of the White House January 16, 2018, in Washington, DC.
Nazarbayev was the sole candidate in the 1991 presidential election held soon after the dissolution of the Soviet Union.
Nevertheless, Nazarbayev's resignation should not come as a surprise, according to Sebastian Schiek of the Berlin-based German Institute for global and Security Affairs.
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In the coming weeks, there will be a flurry of assessments regarding Nazrabayev's 30-year tenure ruling Kazakhstan and great focus on the pending presidential election.
Tokayev has previously served as the foreign minister, deputy prime minister and prime minister, and United Nations deputy secretary-general.
Another possible future leader of the country is Karim Masimov, 53, who was prime minister twice and also served as Nazarbaev's chief of staff.
Nazarbaev's eldest daughter, Darigha, has in the past also been mentioned as a possible replacement for her father.
Uncertainty could also hurt investor appetite for Kazakhstan's biggest state-owned companies, which the government planned to list as part of a privatisation campaign.
Nazarbayev was re-elected five times, with little significant opposition.
Geographically, Kazakhstan has benefited by linking markets of China and South Asia and those of Russian Federation and Western Europe by road, rail, and a port on the Caspian Sea.
Interim President Toqaev, if he remains in the post until next year, will certainly have a decent chance of getting Nazarbaev's nod to run in the presidential election as the Nur Otan candidate, making him a virtual certainty to win the election.
Nazarbayev's government pushed through a number of popular policies in recent months - including raising public-sector salaries and forcing utilities to cut and freeze tariffs - stoking speculation that he was preparing for a re-election bid.