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The 72-year-old has played the Albert Square matriarch since 1994.
The star, who won a lifetime achievement gong at this year's British Soap Awards, said she wanted to spend more time with her husband.
"I'll be so sad to leave Peggy behind. EastEnders has been wonderful to me and it's no secret that it changed my life all of those years ago," she said.
She added that Peggy has been a "wonderful character to play", and singled out showing the Queen around the set of EastEnders as "something that will stay with me forever".
"I'm looking forward to the future and I suppose when all's said and done, I should spend a bit more time with my old man, as he's not getting any younger."
Windsor's agent Barry Burnett told BBC News that the star had no intention of retiring from showbusiness.
"Oh no, absolutely not, can you imagine that? Anyone who knows Barbara knows what she's like," he said.
EastEnders executive producer Diederick Santer described Windsor's character as "truly iconic".
"Barbara has contributed so much to EastEnders over the last 15 years, plus countless episodes, and countless amazing storylines.
"She has made the Mitchells the premiere family of British soap," he added.
"I so much enjoy working with her - catching up with the gossip, listening to her stories, talking about the show, benefiting from her advice, and most importantly revelling in her powerful, funny, passionate performances.
"All of us at EastEnders - and our audience - are going to miss her hugely."
Killed off?
Producers have not revealed how her character will be written out of the show.
But bookmaker William Hill has odds of 1/3 that she leaves and 9/4 that she is killed off.
Phil Mitchell is 6/4 favourite to take over as landlord of the Queen Vic, with Janine Butcher at 6/1.
"We think that the BBC will let Peggy retire gracefully rather that the usual bloody ending," said William Hill spokesman Rupert Adams.
