"I declare on behalf of the Wagner fighters, on behalf of the Wagner command, that on May 10, 2023, we are obliged to transfer positions in the settlement of Bakhmut to units of the defence ministry and withdraw the remains of Wagner to logistics camps to lick our wounds," Prigozhin said in a statement.
"I'm pulling Wagner units out of Bakhmut because in the absence of ammunition they're doomed to perish senselessly."
Wagner has been spearheading Russia's attempt to capture Bakhmut since last summer, in the longest and bloodiest battle of the war in Ukraine.
Earlier on Friday, Prigozhin published an explitive-ridden video, filmed standing in a field of corpses, in which he personally blamed top defence chiefs for losses suffered by his Wagner Group fighters.
Prigozhin's tirade reignited and escalated a long-running feud with Defence Minister Sergei Shoigu and Chief of General Staff Valery Gerasimov, whom he has repeatedly accused of starving his forces of ammunition.
Prigozhin appeared next to dozens of bloodied corpses that he said were those of Wagner fighters. His expletives were bleeped out in the video published by his press service.
"We have a 70 per cent shortage of ammunition. Shoigu! Gerasimov! Where is the ******* ammunition?" he yelled into the camera.
Those responsible would go to hell, Prigozhin shouted, before saying that Wagner's losses would be five times smaller if it was adequately supplied.
"These are Wagner lads who died today. The blood is still fresh," Prigozhin said, pointing to the corpses around him. "They came here as volunteers and they're dying so you can get fat in your offices."
Prigozhin, whose Wagner Group has spearheaded Russia's months-long assault on the east Ukrainian city of Bakhmut, began publicly feuding with defence chiefs last year, accusing them of incompetence, and of deliberately depriving Wagner of ammunition out of personal animosity towards him.
In recently weeks, Prigozhin had refrained from public attacks on Shoigu, even as he continued to suggest that deliberate ammunition shortages had exacerbated Wagner casualty figures.