Davis, 34, said he'll fulfill his remaining contract and then call it a career. He said at the time the deal would allow him to retire as a member of the Panthers, who selected him in the first round of the 2005 draft. He confirmed his decision during an appearance on NFL Network.
"As a father, I want to be able to spend as much time with them as I possibly can - and being an National Football League player, that's not always the case", Davis said.
A two-time Pro Bowler and Walter Payton Man of the Year in 2014, Davis will leave a lasting legacy on the Panthers organization.
Last offseason, Davis got a one-year extension that runs through the 2018 season.
Davis missed all but nine games from 2009-2011 because he tore his ACL three times, but he has started all 78 games he has played over the past five seasons.
Davis is still chasing an elusive goal in his final season - a Super Bowl ring.
He racked up 76 tackles and 2.5 sacks this past season.
During the team's locker cleanout last week after a wild-card loss to the New Orleans Saints, Davis said he expects to play a "reduced role" on defense in 2018. In 13 seasons, Davis has 1,017 career tackles, 28.0 sacks, 13 interceptions and 18 forced fumbles.