Border joined the selection panel in February 1998 and along with chairman Trevor Hohns, David Boon and Andrew Hilditch, helped shape Australia's world-beating Test and one-day teams.
Border cited growing commitments away from the selection table for his decision to quit.
"I've thoroughly enjoyed the opportunity of being involved with Australian teams over the past few years, witnessing the success that both the Test and One-day teams have achieved," Border said in a Cricket Australia statement Wednesday.
"It's certainly been a rewarding role, particularly when it comes to seeing a tough selection pay off, and to see a player come into the side and make the most of an opportunity presented to him."
"Although I am still enjoying the involvement, the role of selector is a big time commitment that takes you away from home on a regular basis. At this stage of my life, I'm looking to do other things with my time," he said.
Cricket Australia said it would canvas a range of suggestions from the six state associations in determining a replacement selector and make a decision in due course.
It said Border would continue in his role as a director of Queensland Cricket and Cricket Australia.
"Allan has been an invaluable member of the selection panel for the past seven years," chairman of selectors Hohns said in the statement.
"His wealth of experience and sound judgment has been vital over time when it's come to making tough calls at the selection table."
Border captained Australia a record 93 times, with 32 wins, from 1984-85 to his retirement from international cricket in 1993-94.
He made 156 Test appearances, a world record than stood until January 2003 when Steve Waugh eclipsed the mark.
Border scored 11,174 Test runs, another world record, as well as 6,524 runs in 273 one-day internationals.