Nooyi, 62, will step down on 3 October, 2018, after a 24-year stint with the company.
Nooyi said Ramon Laguarta is "exactly the right person" to help build PepsiCo's success. She oversaw PepsiCo during a turbulent time in the industry that has forced food giants including Coca-Cola Co., Campbell Soup Co. and Oreo maker Mondelez International Inc.to adapt to changing tastes.
Laguarta, Nooyi successor, has held a number of executive and general management roles in his 22 years at PepsiCo. She will step down on October 3, although remain chairman until early 2019 to ensure a smooth transition.
Under Nooyi's leadership, PepsiCo witnessed a net revenue growth from $35 billion in 2006 to $63.5 billion in 2017 and a compound annual growth rate of 5.5%.
Under Nooyi's leadership, PepsiCo's revenue grew more than 80 per cent, outperforming our peers and adding a new billion-dollar brand nearly every other year.
PepsiCo President Ramon Laguarta will replace Nooyi, the company said in a statement.
'Today is a day of mixed emotions for me. "She has delivered strong and consistent financial performance, managing with an eye toward not only the short-run, but the long-run as well". He had previously been CEO of the European and sub-Saharan African unit of Pepsi before being named the company's president.
PepsiCo's premarket stock price declined slightly after the announcement, CNBC reported.
'Leading PepsiCo has truly been the honor of my lifetime, ' Nooyi said in a statement, adding that, 'Growing up in India, I never imagined I'd have the opportunity to lead such an extraordinary company'.
However, Nooyi will remain the Chairman of the company until early 2019. He has been a critical partner and friend and I am positive that he will take PepsiCo to new and greater heights in the years to come, ' Nooyi tweeted on Monday.
Prior to joining PepsiCo, Laguarta worked at confectionary company Chupa Chups.
PepsiCo's shares were up marginally in premarket trading on Monday.