Osborne, 75, announced his decision Wednesday at a news conference and said he will retire on Jan. 1, sticking around for several months as needed.
"At some point, whether you're able to function or not, the perception that you're getting old can get in the way," Osborne said. "I don't want to be one of those guys everybody is walking around wringing their hands about, what are they going to do with him. That happens sometimes."
Aside from his success as head coach of the Nebraska Cornhuskers football team for 25 years, Osborne was elected to Congress in 2000 and served six years in the U.S. House as a Republican from Nebraska's 3rd district.
After losing a gubernatorial bid, he returned to the university in 2007 to take over the athletic department. He oversaw the rebuilding of the football program as well as the school’s move from the Big 12 to the Big Ten.
As the Athletic Director for the university, Osborne built a new basketball practice facility and entered the program into a public-private partnership to build a 16,000-seat basketball arena in downtown Lincoln that will open for the 2013-14 season. He also oversaw an expansion project that will increase Memorial Stadium's capacity to more than 90,000 next year.
While the great effect he had on the school as Athletic Director will forever be remembered, Osborne is most widely known for his coaching.
Every one of his 25 teams won at least nine games, and three of his last four teams won national championships. He retired with a career record of 255-49-3 -- an .836 winning percentage that ranked fifth all-time among Division I coaches -- and 13 conference titles. He was inducted into the College Football Hall of Fame in 1998, the year after he retired.
"There are people you can admire from a distance and then when you get up close you see all the warts," Chancellor Harvey Perlman said. "That's not been my experience with Tom. It's been fun to interview head coaches with him and to see the national respect and awe they have of his reputation."
Perlman said he has already started searching for Osborne's replacement, and he praised Osborne for stabilizing the athletic department.
"I feel we're well-positioned," Osborne said. "We worked hard on the culture, and part of that has not just been internal. We've tried to link this place with the former players. ... Whatever we've accomplished couldn't happen if we didn't have a united fan base. It would be hard to find one equal to our fans around the country. It allows a program in a state of 1.8 million to be competitive with programs in densely populated areas."