The 34-year-old says the time is right to move to "a less competitive league" and has turned down a new deal from the Gelsenkirchen club.
Raul, who holds Real Madrid's club records for appearances (741) and goals (323), has become a fans' favourite at Schalke after signing from the Spanish giants in 2010.
He scored 13 times in his debut season, including two hat-tricks, and has added a further 14 goals this term to help take the Royal Blues to the brink of a place in the Champions League next season.
Yet after months of speculation, the three-time Champions League winner has elected to move on to pastures new.
"I have made up my mind and will not be playing for Schalke in the future," Raul told reporters at a press conference.
"It was anything but an easy decision for me. I would like to thank the club, the president, the manager - they were all very patient with me.
"I would like to say that my future is going to be outside of Europe.
"I will sit down with my agent once again and we will analyse the offers, but it will be a less competitive league."
Raul, who has been linked with a move to Qatar, became the top all-time scorer in the Champions League during his time at Schalke, moving onto 71 goals, but even the prospect of another year in the competition could not persuade him to stay.
His last home game for the club will be against Hertha Berlin on April 28, and he expects it to be an emotional occasion.
"I had two wonderful years here," he said. "I cannot fail to mention the fans, the very special fans who have shown me so much affection and respect.
"I can only imagine how difficult it is going to be in my final (home) game against Hertha.
"I cannot find the right words to describe it. These fans will always have a place in my heart. This club is and remains a part of my life."
Raul said that being able to spend more time with his family was the key factor in his decision, and that his eventual destination will depend more on them than on money.
"I definitely have the self-confidence to play in a tough league, but it is more about the family," he said.
"I have not been able to spend much time with them lately. The Bundesliga is so demanding that you cannot spend so long with them.
"We will now look at the offers and see what gives me the most time for family life.
"Of course it would have been attractive to play in the Champions League once again, but on the other hand, this further reduces your family life and that is what I want now."
Raul's 27 goals in two seasons have earned him cult status in Gelsenkirchen and Schalke's director of sport Horst Heldt said he will be given a benefit game next year.
"We are working on getting a Spanish club to come here for a testimonial," he said.
"We are also not going to give the number seven shirt to anybody for a while - it would not be easy to step into his footsteps.
"Raul will also become a member of our Hall of Fame, which shows how great we found his time with us."
Club president Clemens Tonnies told Raul: "The doors to Schalke will remain open to you forever.
"Whenever you need us, Schalke and all of our fans will be there for you."