Prime Minister Boris Johnson said the outgoing health chief had “led the NHS with great distinction for the past seven years”.
On Thursday, NHS England said Sir Simon notified the organisation’s board of his decision to stand down “as planned” at the end of July.
He will sit as a crossbencher, according to an NHS England spokesman.
In a statement Sir Simon said: “Joining the health service in my early twenties was one of the best decisions I’ve ever made, followed three decades later by the privilege of leading the NHS through some of the toughest challenges in its history.
“The people of this country have rightly recognised the extraordinary service of NHS staff during this terrible pandemic, as well as the success of our Covid vaccination deployment.
“As the pandemic recedes in this country, the NHS’s track record in advancing medical progress in a way that works for everyone rightly continues to inspire young people to join one of the greatest causes – health and high quality care for all, now and for future generations.”
Health Secretary Matt Hancock also paid tribute to Sir Simon’s for his work.
“Throughout his tenure Sir Simon Stevens has been a steadfast and sage leader for our National Health Service, and that has been especially true during this most testing period in NHS history,” he said.
“His leadership has helped NHS staff to overcome unprecedented adversity and keep services open for millions of patients in the face of this global pandemic.
“The past seven years has seen Sir Simon make a formidable contribution to the running and transformation of health and care services in England, which will no doubt endure for years to come.
“I want to thank him personally for his service to the NHS in England, and I wish him all the best for the future including his new role in the House of Lords.”
Health and Social Care Committee chairman and former health secretary Jeremy Hunt said Sir Simon should feel “extremely proud” of his role in the NHS response to the Covid-19 pandemic.