Bell made the surprising announcement on Wednesday afternoon at the Metrodome, where the Royals are playing the Twins.
He will continue to manage the club for the last two months of the season and then remain with the Royals as a senior advisor to general manager Dayton Moore.
Bell, who underwent cancer surgery last year, said his health is great but his priorities have changed.
"A lot of things have happened to me personally since I've been manager of the Royals that have affected me. When I did get sick, things did change the way I prioritized my life," he said at a news conference.
"I have grandchildren, I have a daughter that's handicapped and needs a lot of attention and I want to spend more time with. And, quite frankly, I need to be at home."
Bell, 55, is in his second full season as the Royals' manager. He took over on May 31, 2005, succeeding Tony Pena, who resigned. Bell was in the last year of his contract.
Late last season, Bell was diagnosed as having a cancerous growth behind his left tonsil. He missed the last 10 games of the season to have surgery.
Bell, son of former big league outfielder Gus Bell, presides over a large family. He and his wife, Gloria, have five children, including baseball-playing sons David, Michael and Ricky and daughters Kristi and Traci, who has Down's syndrome.
"The problem is I love managing so much and I love these players so much, I had to make a choice -- managing or my family," he said. "And, to me, that's a no-brainer. I've been in this game for almost 40 years now, and it's time for me to pay a little more attention to my family."
Bell told his players in a clubhouse meeting at 4:15 p.m. CT Wednesday, then met with reporters, many of whom arrived from the Kansas City Chiefs' camp at River Falls, Wisc., about 40 miles from Minneapolis.
"I couldn't come in there every day and look the players in the face, knowing I wasn't going to come back," Bell said.
"I just thought that was a little dirty. So I thought this was the best possible time to do it."
Daughter Traci, he said, was being prepared for her father's decision by his wife.
"I hope she's not watching TV right now," Bell said, chuckling. "She's the biggest Royals fan of all, so if you guys could not report this until tomorrow, I'd appreciate it."
Bell, who now has a home in Chandler, Ariz., said he and Gloria were moving back to Cincinnati to be near his mother, his children and grandchildren, and his brothers and sisters.
After he finishes the season, Bell will help Moore make evaluations at the Major League and Minor League levels. He will scout games in the Cincinnati area and elsewhere and help out in Spring Training.
"This is something we've talked about throughout the year at various stages, and I'm just grateful that Buddy has made the decision to stay with us to help us continue to grow," Moore said.
As Bell made his decision public, his three-season record with the Royals was 152-228. His first two teams finished last and his current club also was fifth but, in the last two months, there were indications of a turnaround.
The Royals finished June and July with winning records, the first time the franchise has experienced back-to-back winning months since 2003. Escaping last place has become a real possibility.
"It's hard to walk away from my job because of that," he said. "I see a lot of improvement, I see the progression, I see guys getting better on a daily basis, I see the chemistry in the clubhouse, I see the respect the organization is starting to get back," he said. "It's good to see that happening."
His decision obviously will trigger speculation about his successor and Moore will have ample time to screen candidates. Possibilities will include bench coach Billy Doran, former star Frank White, Triple-A Omaha manager Mike Jirschele and former Major League managers such as Joe Girardi.
Whenever the Royals are looking for a manager, Hall of Famer George Brett's name emerges, but he's not believed to be interested in such a commitment. Brett is currently the Royals' vice president of baseball operations.
The Royals will be looking for a manager who is not only skilled in running a ballgame, but one who can communicate well with young players.
Patience, obviously, will be a virtue and Bell has shown that with the emerging Royals. He has been able to withstand the mistakes of inexperience while molding an attitude geared toward the pride of winning.
Bell previously managed the Detroit Tigers (1996-98) and the Colorado Rockies (2000-2002) and is three victories shy of No. 500. His career record is 497-690.
"By no means am I burned out on managing. And it has nothing to do with anything I've been through [with the team] in Kansas City. As everybody knows, things have been going quite well," Bell said.
"In fact, I wanted to wait until things got better and then decide if I still felt this way."
An outstanding third baseman, Bell played 18 years in the Major Leagues with the Cleveland Indians, Texas Rangers, Cincinnati Reds and Houston Astros. He was an All-Star five times and won six Gold Gloves. His career average was .279 with 201 home runs.
Bell came to the Royals after serving two-plus seasons as the Indians' bench coach. He also was on the Indians' staff in 1994-95 during the managerial tenure of Mike Hargrove, who resigned as Seattle Mariners manager on July 1.
He also worked in the front office for the Indians, the Reds and the Chicago White Sox.
Bell was able to effect an improvement in the Royals in each of his seasons. He took over a 2005 club that was 13-37 (.260) and guided them to a 43-69 (.384) mark. In 2006, the club started 16-47 (.254) but then went 46-53 (.475). This year, after being 19-35 (.352), the Royals were 28-24 (.538) in the last two months.
He is the 14th full-time manager of the Royals in their 39-year history.
Now, after Sept. 30, he'll be at home -- at least for much of the time.
"I can't stay at home," Bell admitted with a grin. "First of all, I know my wife doesn't want me to stay there all the time. I know that for sure."
Dick Kaegel is a reporter for MLB.com. This story was not subject to the approval of Major League Baseball or its clubs.