Barrett’s departure comes as Intel closes plants and lays off workers to deal with dismal economic conditions worldwide.
Jane Shaw, who joined the Intel board in 1993, has been chosen to replace Barrett.
"Intel became the world’s largest and most successful semiconductor company in 1992 and has maintained that position ever since," said Barrett. "I have every confidence that Intel will continue this leadership under the direction of (chief executive) Paul Otellini and his management team."
Barrett joined Intel in 1974 and served as chief executive from 1998 through 2005.
Barrett’s work at Intel has included programmes promoting information technology in emerging economies as well as in education, health care and US competitiveness.
"I want to thank Craig for his 35 years of tireless efforts on behalf of Intel," said Otellini.
"His legacy spans the creation of the best semiconductor manufacturing machine in the world, leading Intel for seven years as we emerged into a global powerhouse … He has been my colleague, supervisor, mentor and friend."
Word of Barrett’s retirement comes just days after Intel announced it will close facilities in Malaysia, the Philippines and the United States.
The Santa Clara, California-based company said the moves are expected to affect between 5 000 and 6 000 employees worldwide.
Intel reported last week that the economic slowdown and slumping demand for personal computers sent net profit sharply lower in the fourth quarter of the year.
It said net profit in the last three months of the year plunged to $234 million, down 90 percent from a year ago.
Intel has also warned that it expects even worse results this quarter than the previous three months, with expected revenue of $7 billion.