The 33-year-old Belgian has decided to call time on his 11-year association with the club having won four Premier League titles, two FA Cups, four League Cups and two Community Shields.
In total, he has played 360 times, scoring 20 goals.
Commenting on his decision, Kompany told the club’s website: “As overwhelming as it is, the time has come for me to go. And what a season to bow out. I feel nothing but gratefulness. I am grateful to all those who supported me on a special journey, at a very special club.
“I remember the first day, as clear as I see the last. I remember the boundless kindness I received from the people of Manchester.
“I will never forget how all Man City supporters remained loyal to me in good times and especially bad times. Against the odds you have always backed me and inspired me to never give up.
“Sheikh Mansour changed my life and that of all the City fans around the world, for that I am forever grateful. A blue nation has arisen and challenged the established order of things, I find that awesome.”
Paying tribute to Kompany’s huge contribution to the club’s success, City chairman Khaldoon Al Mubarak said: “There have been many important contributors to Manchester City’s renaissance, but arguably none are more important than Vincent Kompany.
“He defines the essence of the club. For a decade he has been the lifeblood, the soul, and beating heart of a supremely talented squad.
“A booming voice in the dressing room yet a quiet and measured ambassador off it, Vincent can be as proud of himself as we are of him.
“His leadership, intelligence and determination have seen him adapt brilliantly to playing under four different managers and overcome some debilitating injuries. He is a special character who has answered every demand the club has made of him.
“We now look forward to celebrating his testimonial match in September so that we can properly celebrate his City contribution. He will always be part of the City family.”
Kevin De Bruyne hailed the legacy created at Manchester City by long-serving captain Vincent Kompany after the club completed an unprecedented domestic treble with a 6-0 thrashing of Watford in the FA Cup final.
The Hornets were swept aside at Wembley on Saturday and Belgian midfielder De Bruyne had high praise for his skipper, whose City future is unclear heading into the summer.
“Ah, he’s very important. You know to be at the club for 10, 11 years says enough, you know, and especially at the level that City is playing now,” De Bruyne said of his compatriot.
“To maintain that level says enough about Vinnie and whatever he does I support him and his decision. I don’t know what he’s going to do. I think he showed enough already to everybody in the world and I think it’s his time to make his decision.
“You know, I think everybody should wait until he decides and that’s it. If he goes it would be, yeah, a little bit bad for us. But then other people have to pick up (from) what he left.
“The legacy he left behind is great not only for City but in the Premier League, and I think everybody should appreciate what he’s done for English football.”
City battered Watford 6-0 to lift the FA Cup at Wembley, completing an unprecedented trio of trophies in ruthless style.
Guardiola had targeted a quadruple, but City were dumped out of the Champions League quarter-finals by Tottenham.
But with the FA Cup in the bag alongside the Premier League and Carabao Cup, boss Guardiola believes City’s consistency in winning a record 50 matches in a single season carries more weight than had they conquered Europe.
“It’s one of the best seasons I have experienced as a manager,” said Guardiola. “I wouldn’t say the best but one of the best for sure.
“To be the first to win the treble means that if one team is able to do that another team will repeat it sooner or later.
“But we were the first, and that means consistency every day for 10 months.
“I love the Champions League but to do that is more difficult than to win the Champions League.”
Raheem Sterling bagged a brace as City ran Watford ragged, with the England forward denied a hat-trick with his side’s second goal credited to Gabriel Jesus on review.
Jesus struck twice, with David Silva and Kevin De Bruyne also on target as Watford were simply blown away.
Sterling grew up in Wembley’s shadow, watching the new stadium be constructed while dreaming of one day gracing the hallowed turf.
Where once Sterling the youngster was on the outside looking in, the 24-year-old was Saturday’s centre of attention.
Guardiola hailed Sterling for maturing rapidly this season, as much off the field as on, speaking out against racism in sport and gaining widespread respect in the process.
“He’s grown up as a man, that happens; he’s a father, he’s definitely grown up,” said Guardiola.
“And that’s good, that’s a good sign. Raheem has had an incredible season. One reason why we are here is Raheem.
“We don’t have to forget what we’ve done this season, but at the same time we have to start again next season knowing we can do better.
“So I want to say thank you so much to everybody for this incredible commitment.
“The players are the reason why we have done what we have done.”
Guardiola insisted Sterling would not be upset to miss out on a hat-trick, and also downplayed the margin of City’s victory.
“Honestly it doesn’t mean too much, whether one player scores three or one; it doesn’t matter,” said Guardiola.
“And it was just important to win the title, the number of goals was not important.”
Watford boss Javi Gracia vowed the Hornets will come back stronger from their Wembley humbling, thanking supporters for offering him a constantly warm reception.
Asked how he felt when Watford fans waved flags in their thousands in solidarity at the game’s death, Gracia said: “It’s difficult; it’s difficult for me to explain with words my feeling in that moment.
“I’m very proud to be a part of this club and the supporters we have.
“Sometimes you have to lose these games to do it better in the future. So I think it’s good for us.
“It’s a good experience, I know in this moment it’s hard for all the Watford supporters, but we have to look at the future.
“We are not satisfied with this defeat, but I think it will be good for the future.
“It’s a step forward for us to live this experience.
“And I’m sure we’ll have more options in the future, not only in the FA Cup, the Premier League as well, we want to improve and do better next season.”