He said that he made the decision in light of Umno's support for the actions of Prime Minister Datuk Seri Najib Tun Razak.
Among the other reasons are the RM2.6bil and 1Malaysia Development Berhad (1MDB) issues.
"The organisation that is led by Najib today is no longer the Umno which was founded on May 11, 1946," he said.
When asked whether his son and former Kedah mentri besar Datuk Seri Mukhriz Mahathir would also leave Umno, he said:
"I can't speak for my son but my wife joins me in leaving Umno."
At a press conference at the Perdana Leadership Foundation here on Monday, Dr Mahathir said he would not start a new party nor would he be joining another party.
"I have dedicated myself to Umno even when I was expelled by Tunku Abdul Rahman. I have never joined any other party. I have always supported Umno but Umno is no more," he said.
"Some people say I'm disappointed that my son is not Prime Minister.
If I wanted my son to be Prime Minister, I could have promoted him during the time I was Prime Minister but you know very well that he could only go into politics after I left," Dr Mahathir said.
"I don't practise nepotism. In fact, my relatives feel that I am too strict on this."Before the press conference, he attended a meeting with leaders of Parti Amanah Negara (Amanah).
Dr Mahathir was expelled from Umno after the 1969 riots and was only readmitted to the party in 1972.
This is the second time Dr Mahathir is quitting the party, which he led from 1981 to 2003, when he was prime minister.
He first quit in May 2008 during the tenure of former prime minister Tun Abdullah Ahmad Badawi.
In 2009, he rejoined Umno when Najib became prime minister.