The four-time All Star will remain with the Astros as part of a personal-services agreement reached with the team earlier this week, according to a person familiar with the team's plan who requested anonymity because an official announcement had not been made.
Bagwell, the greatest power hitter in Houston Astros history, is expected to work with young Astros hitters, assisting in the front office and making appearances for the team.
The Astros have scheduled a Friday morning news conference to announce the retirement.
Bagwell, 38, leaves the Astros as the team's all-time leader in home runs (449), RBI (1,529), walks (1,401) and extra-base hits (969). He had a lifetime batting average of .297.
Despite his unique and highly unorthodox batting stance, Bagwell displayed remarkable power at the plate, ranking among the top 15 players in home runs and RBI throughout the 1990s. His 449 home runs leaves him three behind his childhood idol, Carl Yastrzemski.
A Boston native, Bagwell's minor-league contract was owned by the Boston Red Sox until August 1990, when the Red Sox traded him to the Astros for pitcher Larry Andersen. Astros manager Art Howe switched Bagwell from third base to first base to accommodate Astros third baseman Ken Caminiti, soon to become one of Bagwell's close friends.
Bagwell's impact was immediate, and he was named the National League rookie of the year in 1991, hitting .294 with 15 homers and a club rookie record of 82 RBI.
He went on to win three Silver Slugger awards and one Gold Glove.
It was in the strike-shortened season of 1994 that Bagwell had perhaps his best season, hitting .368 over 110 games, slamming 39 home runs and knocking in 116 runs to lead the Astros within a half-game of Cincinnati before a players strike ended the season Aug. 12. As a result, Bagwell was unanimously selected the National League's most valuable player.