The 49-year-old judge released a statement confirming her exit, following recent rumours about her future. Simon Cowell thanked Abdul for her time on the programme, and hinted that the pair may be working together again in the "near future".
The news follows the departures of fellow judge Nicole Scherzinger and host Steve Jones.
She said: "Yes, it's true; I won't be returning to The X Factor next season. I've learned through my longevity in this industry that business decisions often times overrides personal considerations.
"Simon [Cowell] and I, along with Fox and Fremantle, have been communicating about this for a while now, and I have absolute understanding of the situation.
"Simon is, and will remain a dear friend of mine and I've treasured my experience working this past season with my extended family at Fox and Fremantle.
"I want nothing more than for The X Factor to exceed ALL of their wildest dreams. This truly has been a blessing and I am most grateful."
Moments after Abdul's announcement, Scherzinger also confirmed her departure from the Fox talent contest via Twitter. Host Jones announced his exit on Monday night.
Cowell expressed his gratitude to Abdul, Scherzinger and Jones in a statement, saying: "I want to say a massive thank you to Paula, Nicole and Steve for being part of The X Factor last year. We had a lot of fun making the show together and importantly, we found some real talent and stars.
"You do develop friendships with the people you work with and Paula, in particular, is a very close friend and I expect to be working with her on another project in the near future.
"I'm sure all three are going to have massive success in what they do next, but now is the time to thank them all for everything they did last year."
After being renewed in November despite scoring lower ratings than was hoped, Fox's entertainment chief Kevin Reilly said that there would be "some changes" to the format.
Watch Paula Abdul discuss her category during last year's X Factor below: