In a statement, Prince Harry and Meghan also said they plan to split their time between the UK and North America.
The BBC understands no other royal - including the Queen or Prince William - was consulted before the statement and Buckingham Palace is "disappointed".
Senior royals are understood to be "hurt" by the announcement.
Last October, Prince Harry and Meghan publicly revealed their struggles under the media spotlight.
In their unexpected statement on Wednesday, also posted on their Instagram page, the couple said they made the decision "after many months of reflection and internal discussions".
"We intend to step back as 'senior' members of the Royal Family and work to become financially independent, while continuing to fully support Her Majesty The Queen."