Mr Ma, one of China's richest men, will hand over the reins to Daniel Zhang, now Alibaba's chief executive.
The co-founder of the company, Ma, will however, remain as a board member of the Alibaba Group until the annual shareholder meet in 2020.
Ma, who co-founded Alibaba in 1999, is one of China's richest people with a net worth of US$36.6 billion, according to Forbes while the company has grown to have more than 66,000 full-time employees and market value of some $420 billion.
The businessman described the move as a step up to the "next level of corporate governance", and transition from a company that fully relies on individuals to "one built on systems of organizational excellence and a culture of talent development".
Alibaba listed in NY in 2014 in what was then the world's biggest initial public offering of shares.
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.
Ma will continue as executive chairman of the company over the next 12 months to ensure a smooth transition.
He said he wanted to dedicate more time to philanthropy through the Jack Ma Foundation. I plan on continuing my role as the founding partner in the Alibaba Partnership and contribute to the work of the partnership.
The plan, announced on Mr. Ma's 54th birthday, took 10 years to put together.
The colourful and charismatic co-founder of Alibaba appears to revel in the limelight.
Mr Ma said recently in an interview with Bloomberg that "there's a lot of things I can learn from Bill Gates", who also founded his own philanthropic foundation before stepping down as chief executive of Microsoft.
Last year, he made his acting debut with his first kung fu short film Gong Shou Dao, in which he sparred with martial arts master Jet Li.