Gary Locke said he informed President Barack Obama of his decision when they met earlier this month.
Locke, who is married with three children, took up the post in August 2011 and was the first Chinese-American to hold it. Both his father and grandfather were born in China.
Locke said in a statement that he was proud of what the U.S. Embassy and Consulates in China have accomplished, including increasing U.S. exports to China, promoting Chinese investment in the U.S. and reducing waiting times for a visa to three to five from highs of 70-100 days, which has "significantly increased" Chinese business and tourism travel there.
He said that during his tenure embassy officials advanced American values by meeting with religious leaders and human rights lawyers and visiting Tibetan and Uighur ethnic minorities in Tibet and Xinjiang.
As a former U.S. commerce secretary and two-term governor of Washington state, boosting trade and maintaining smooth relations between Washington and its biggest foreign creditor were seen as his priorities when he became ambassador.
Yet less than a year into his tenure, he was earning respect from the human rights lobby for his role in the drama over blind legal activist Chen Guangcheng, who escaped from house arrest, sought refuge in the U.S. Embassy in Beijing and later moved to New York. At one point, Locke was photographed holding Chen's hand as they entered a hospital.
He was popular among ordinary Chinese from day one, with a photo of him wearing a backpack and trying to use a coupon to buy coffee at Seattle airport widely posted on the Chinese Internet. It contrasted with Chinese bureaucrats, who have aides attend to such minor tasks.
He attracted overflowing audiences to his speeches at Chinese universities, and huge crowds showed up when he visited his ancestral home in the southeastern province of Guangdong.
Locke said U.S.-China relations continue to grow stronger despite a complex relationship. "I remain confident in the ability of our leaders to manage differences and increase cooperation in areas of mutual concern to the benefit of not just our two great peoples, but the entire world," he said.