Mr Joyce advised the board he was bringing forward his retirement by two months to "help the company accelerate its renewal", the airline announced on Tuesday.
CEO-designate Vanessa Hudson will assume the role of managing director and group chief executive on Wednesday.
"In the last few weeks, the focus on Qantas and events of the past make it clear to me that the company needs to move ahead with its renewal as a priority," Mr Joyce said.
"The best thing I can do under these circumstances is to bring forward my retirement and hand over to Vanessa and the new management team now, knowing they will do an excellent job."
He said he was proud of his 15 years at the helm of the airline.
"There have been many ups and downs and there is clearly much work still to be done, especially to make sure we always deliver for our customers," Mr Joyce said.
"But I leave knowing that the company is fundamentally strong and has a bright future."
His decision comes after a horror week for Qantas, which has been marked by a Senate grilling on delays and warnings the airline faces a possible $250 million fine.
The Australian Competition and Consumer Commission announced it was taking court action after Qantas allegedly advertised tickets for flights that had already been cancelled.
The company is reviewing the allegations made by the consumer watchdog and has acknowledged its standards "fell well short" as the airline emerged from the COVID-19 pandemic.
Last month Qantas announced a record pre-tax profit of $2.47 billion for the past financial year, after recording a loss of almost $2 billion the previous year.
Soon after, it came under pressure to pay back the money it received from the federal government at the height of the pandemic.Â
It was given $2.7 billion from taxpayers, including $900 million from the JobKeeper program.
Qantas chairman Richard Goyder thanked Mr Joyce for his leadership.
"Alan has always had the best interests of Qantas front and centre and today shows that," he said.
Labor senator Tony Sheldon, who has led calls for Qantas to be more accountable, said Mr Goyder "should go next".
ACTU president Michele O'Neil said the airline should next dump its "culture of profit over people".
Shareholders will formally vote on the appointment of Ms Hudson as managing director at the company's annual general meeting in November.
The Australian and International Pilots Association said the announcement would provide Qantas the "circuit breaker" needed to allow the airline to move forward.
Workplace Relations Minister Tony Burke said he looked forward to working with the new CEO and having new "labour hire loophole" laws passed.
"Qantas is a company that has been using the labour hire loophole in a pretty extraordinary way and my objective is the make sure that people at Qantas are paid fairly," Mr Burke said.
The government is also facing questions over whether it deliberately favoured Qantas in a decision to knock back extra flights sought by Qatar Airways.
Nationals Senate leader Bridget McKenzie is set to move a motion to set up an inquiry into the decision-making process and its impact on ticket prices, tourism and the broader economy.
"Something is not right about this relationship between the federal government, Alan Joyce and, more broadly, Qantas," she said.
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