Professor Farwell has led the university for nine years and oversaw its transition from a university college to full university in 2007.
She said she believed “passionately” in what Bucks New did for students “but feel that this is the right time for me to retire”.
“We have set in place a vision of a professional, practice-based and industry-related university, which I believe is hugely important for our students, helping them bridge the gap between education and their chosen careers,” she said.
“We have developed a strong base for learning in partnership with important employers. Great opportunities lie ahead and this is the perfect time for a new leader to expand what has been achieved with both public and private sector employers.”
The university is to seek a new vice-chancellor to take forward what it said was Professor Farwell’s ambition “to integrate university education with the workplace”.
Dame Christine Beasley, chair of the university’s council, said: “We are extremely grateful to Ruth for her unreserved commitment and dedication throughout her nine years as head of the institution.
“We aim to have a new vice-chancellor in post at the start of 2015 to build on her many achievements, including gaining full university status in 2007.
“Ruth has steered the university through dramatic changes in higher education that have put much more emphasis on the need to prepare students for the world of employment.”
As well as her role at Bucks New, Professor Farwell has been a member of the board of the Higher Education Funding Council for England since 2009 and is former chair of GuildHE.
During her career, she has been a pro vice-chancellor at London South Bank University, the head of the University of Brighton’s strategic planning unit and a research fellow at Imperial College London. A mathematician, she gained her PhD from the University of Kent.
One of the small number of female vice-chancellors in the UK, she wrote for Times Higher Education last year about her own experience of rising up the ranks.