Paterno, one of the biggest names in American sports and winner of two national championships, said in a statement that the situation was a tragedy and "one of the great sorrows of my life."
"I am absolutely devastated by the developments in this case. I grieve for the children and their families, and I pray for their comfort and relief," he said.
Paterno, in his 46th year as head coach of the Nittany Lions, has been criticized for not doing more to intervene in the case of Jerry Sandusky, a former assistant coach, when incidents of abuse came to light.
"With the benefit of hindsight, I wish I had done more," said Paterno.
Paterno was spotted briefly on Wednesday, leaving his house in a car driven by another person. He gestured for reporters gathered in his front yard to move away. The pair return ed several minutes later, and drove into the garage without making any comments.
Many students have rallied around the 84-year-old coach, who with his thick, black-rimmed glasses and blue windbreaker has been the face of Penn State football for generations.
Tuesday night, several thousand gathered in front of Paterno's home before racing through downtown streets, often chanting football slogans, to the white-columned administration building to support Paterno and defend the university.
'A SAD DAY'
Tom Corbett, governor of Pennsylvania, termed Paterno's retirement part of a string of bad days for Penn State since the scandal erupted last week.
"It is unfortunate that his retirement is taking place under the cloud that is going on. It is a sad day, It's been a sad day for a number of days," Cor bett told reporters at a press conference in the state capital of Harrisburg.
Corbett was the state's attorney general when authorities started their investigation into Sandusky, and would not discuss the details of the case, saying only that "he who preys on a child is the worst person in the world."
Two former university officials -- athletic director Tim Curley and finance official Gary Schultz -- were charged on Monday with failing to alert police after they were told that Sandusky had been seen sodomizing a young boy in the football locker room shower in 2002.
They have also been charged with perjury in their statements to a grand jury.
Lawyers for all three men have said their clients deny the charges and maintain their innocence.
Penn State's board of trustees voted late Tuesday to appoint a special committee to determine what failures occurred related to Sandusky's alleged crimes and officials' response, saying it was "outraged by the horrifying details contained in the grand jury report."
The trustees are expected to have a series of meetings over the next few days.
"At this moment the board of trustees should not spend a single minute discussing my status. They have far more important matters to address," Paterno said.
The grand jury report detailed alleged sexual assaults of eight boys by Sandusky over 15 years -- during his time as a Penn State coach, and after his retirement in 1999.
Since then a ninth potential victim, a man now in his 20s, has come forward, and Pennsylvania police have set up a tip line for others to call.
Sandusky, 67, allegedly recruited his v ictims from a charity he founded to help underprivileged children.
Penn State has three regular season games left on its schedule. Its final home game is against Nebraska on Saturday. The team is 8-1 on the season.
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