The 41-year-old has umpired in 74 Tests and 174 one-day internationals in his outstanding career, winning ICC Umpire of the Year award for five successive years from 2004 to 2008.
Taufel said in an ICC statement that he wanted to spend more time with his family.
"In my new position as ICC umpire performance and training manager, I look forward to help create professional programmes and resources to support the current and future generations of cricket match officials," he added.
ICC Chief Executive David Richardson paid tribute to one of cricket's most consistent umpires.
"Simon has been one of the most respected umpires for over a decade due to his excellent decision-making and man-management skills.
"He has been a role model for umpires globally who look to him for inspiration and guidance," he added.
Fellow Australian Bruce Oxenford has replaced Taufel on the elite panel. He has been on the International Panel since 2007-2008.