Lewis Hamiliton signs three-year deal with Mercedes
The move for the 2008 world champion comes after Mercedes-Benz signed a new commercial agreement with the sport's commercial rights holders, guaranteeing the team's long-term commitment.
There was no word on Schumacher's future plans.
Austrian Niki Lauda, a triple world champion, will join the team as a non-executive chairperson of the board.
Hamilton's McLaren team had already announced Mexican Sergio Perez as his replacement for next season.
The 27-year-old Hamilton, nurtured through the McLaren/Mercedes Young Driver Support Programme as a teenager, made his F1 debut in 2007, almost winning the championship as a rookie.
"It is now time for me to take on a fresh challenge and I am very excited to begin a new chapter racing for the Mercedez AMG Petronas Formula One team," Hamilton, who has driven in 104 grand prix, said in a statement.
"Mercedes-Benz has such an incredible heritage in motorsport, along with a passion for winning which I share.
"Together, we can grow and rise to this new challenge. I believe that I can help steer the Silver Arrows to the top and achieve our joint ambitions of winning the world championships."
He will partner Nico Rosberg next year.
The future for Schumacher is unclear with the German admitting that his comeback from retirement had not worked out as well as he had hoped.
"I have had three nice years with the team which unfortunately did not go as well as we all would have wanted on the sporting side," he said in a statement.
"I wish Lewis well and for the team to achieve the success we worked so hard for in the build-up.
I would like to thank the team for their trust and all the guys for their unconditional commitment.