Ms Manzano, 65, joined the show in 1971 and became a series regular in 1974, giving helpful advice to characters like Big Bird and Elmo.
She was also a writer on the show, winning 15 Emmy Awards for her work.
The news has led to a flood of tributes on social media, with many remembering her fondly from their childhoods.
Ms Manzano told a conference of librarians in San Francisco that she would not be returning for Sesame Street's next season.
"Thank you but don't be bummed!" Ms Manzano later tweeted to disappointed fans, adding that she could return for the show's 50th anniversary.
Her character arrived on Sesame Street working at a bookstore but eventually moved to the Fix-It Shop alongside Luis, the show's Mexican-American handyman.
Over the years on the show, Maria and Luis got married and even had a child.
Sonia Manzano, who has played Maria on the US children's programme Sesame Street for more than four decades, is retiring.