The 74-year-old star would record one final album with Stevie Wonder before stepping out of the limelight, reported BBC.
"I must tell you, I am retiring this year," Franklin told a Detroit TV station, adding that she felt "exuberant" about her plans.
Looking back on her success, the star said, "I feel very enriched and satisfied with respect to where my career came from and where it is now".
The singer, however, said that she would remain open to "some select things, many one a month, for six months out of the year".
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Franklin has won a total of 18 Grammy awards and is one of the best-selling artistes of all time, having sold over 75 million records.
She has sung at three presidential inaugurations (for Barack Obama, Bill Clinton and Jimmy Carter) and influenced generations of musicians across soul, R&B, gospel, pop and rock.
Franklin has been honored throughout her career, including a 1987 induction into the Rock and Roll Hall of Fame, in which she became the first female performer to be inducted. She was also inducted to the UK Music Hall of Fame in 2005.