Laguarta, Nooyi successor, has held a number of executive and general management roles in his 22 years at PepsiCo.
The company announced that its Board of Directors has unanimously elected Ramon Laguarta to succeed Nooyi as Chief Executive Officer.
Nooyi led Pepsi to become one of the most successful food and beverage companies in the world.
While many congratulated Nooyi on successfully leading the company for several years, others expressed sorrow over the decision.
She also described "mixed emotions" about leaving the role.
She is also largely credited with re-shaping Pepsi with tactical mergers, such as acquiring Quaker Oats - and its sports drink Gatorade brand - and shifting attention to healthier drinks, such as juices and teas, over sugary sodas. Sales grew 80% during her 12-year tenure.
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He now serves as president, overseeing global operations, corporate strategy, public policy and government affairs.
"Growing up in India, I never imagined I'd have the opportunity to lead such an extraordinary company", Nooyi said.
Ramon Laguarta, who has been with the company for more than two decades, will take over as CEO in October, the company said Monday. Prior to that, Laguarta served in leadership positions in the European and sub-Saharan Africa divisions.
He was elevated to president in September of a year ago and was widely expected to succeed Nooyi, though at the time of his appointment Nooyi said she would remain CEO "for the foreseeable future". "She has transformed the company with her bold vision and outstanding leadership, and I feel fortunate to have her as a mentor and a friend".
Under Nooyi's leadership, PepsiCo's revenue grew more than 80 per cent, outperforming our peers and adding a new billion-dollar brand nearly every other year.
PepsiCo's shares were up marginally in premarket trading on Monday.