Seven-time champion Schumacher, 43, the most successful driver in the history of Formula One, today [Thursday] announced his decision to quit the sport for a second time at the end of the season.
His departure from Mercedes was confirmed last week, when it was announced that Hamilton had signed a three-year deal with the German marque.
Mercedes moved for Hamilton as Schumacher could not give them a definitive answer on whether he would carry on racing beyond the end of the season, and the completion of that deal left him with very few options.
There had been suggestions Schumacher would join Sauber, for whom he raced sportscars in the late 1980s and early 1990s, in 2013, but his emotional statement at a Mercedes press conference means he has just six races left of his career.
Hamilton will fill his shoes next season, and Schumacher has backed the Briton to shine, admitting the confirmation of the 2008 world champion's move from McLaren had helped him to make up his mind about his future.
"We all know Lewis is one of the best drivers we have around and I am sure he and the team will have a successful future," he said.
"The team had an option in Lewis that helped me decide.
"I was in the picture when negotiations were going on but I was not sure about myself. I have no hard feelings."
Despite his unsuccessful comeback with Mercedes, he has scored just one podium in three seasons, after initially retiring in 2006, Schumacher's place in the annals of F1 history is secure.
His first stint in F1, between 1991 and 2006 saw him rewrite the sport's record books, winning seven world titles and 91 races.
He will be best remembered for helping to revive Ferrari's fortunes after joining the Prancing Horse in 1996 as part of the 'Dream Team' along with Ross Brawn, Jean Todt, Rory Byrne and Paolo Martinelli, winning five straight titles between 2000 and 2004.
Along the way he set new standards in terms of driver fitness and of understanding of race strategy as he and Brawn dovetailed beautifully.
Collisions in title deciders against Damon Hill in 1994 and Jacques Villeneuve in 1997 damaged his reputation, as did his ruthless squeezing of former Ferrari team-mate Rubens Barrichello towards the pitwall in Hungary in 2010.
But to many within the sport he is one of, if not the finest driver of all time, while Mercedes boss Brawn called him "the greatest driver of this century" during his retirement announcement.
And Hamilton, speaking prior to the news of Schumacher's decision, is in no doubt as to the size of the task that awaits him in filling the seat vacated by the German.
"I don't see myself as replacing Michael. I don't think anyone can replace Michael, he's a legend in the sport, he has achieved so much already," he said.
"I feel privileged to have been in F1 at the same time as him. I watched him winning all his world championships at home in my living room so to have been on the track with him in 2006 and then for him to come back and for me to get to race against him has been a real privilege so I hope one day, I can achieve some of the things he has done."