The move comes after it temporarily closed its 850 outlets in March.
The fast food giant said it made the decision because of the "humanitarian crisis" and "unpredictable operating environment" caused by the Ukraine war.
The opening of McDonald's first restaurant in Moscow in 1990 came to symbolise a thaw in Cold War tensions.
A year later, the Soviet Union collapsed and Russia opened up its economy to companies from the West. More than three decades later, however, it is one of a growing number of corporations pulling out.
"This is a complicated issue that's without precedent and with profound consequences," said McDonald's chief executive Chris Kempczinski in a message to staff and suppliers.
"Some might argue that providing access to food and continuing to employ tens of thousands of ordinary citizens, is surely the right thing to do," he added.
"But it is impossible to ignore the humanitarian crisis caused by the war in Ukraine. And it is impossible to imagine the Golden Arches representing the same hope and promise that led us to enter the Russian market 32 years ago."
McDonald's said it would sell all its sites to a local buyer and would begin the process of "de-arching" the restaurants which involves removing its name, branding and menu. It will retain its trademarks in Russia.
The chain said its priorities included seeking to ensure its 62,000 employees in Russia continued to be paid until any sale was completed and that they had "future employment with any potential buyer".
McDonald's said it would write off a charge of up to $US1.4 billion ($NZ2.2b) to cover the exit from its investment.
The move comes after Renault announced it was selling its business in the country. The French firm said its 68 percent stake in carmaker Avtovaz would be sold to a Russian science institute, while its shares in Renault Russia will go to the city of Moscow.
Moscow said Renault's Russian assets had now become state property - marking the first nationalisation of a major foreign business since the invasion of Ukraine.
Last year, Russia and Ukraine accounted for about 9 percent of McDonald's global sales.
The chain's 108 restaurants in Ukraine remain closed due to the conflict but the company is continuing to pay full salaries to all its employees there.
McDonald's initially faced criticism for being slow to halt its business in Russia, with some calling for a boycott of the company before it suspended operations in March.
Hundreds of international brands, including Starbucks, Coca Cola, Levi's and Apple, have left Russia or suspended sales there since the country invaded Ukraine in February.
Other firms, including Burger King and Marks and Spencer, say they are unable to close stores due to complex franchise deals.
Photo: AFP Caption: The McDonald's flagship restaurant at Pushkinskaya Square in Moscow.