Montgomery reportedly met with athletic director Sandy Barbour about his future and chose to retire. The school will make a formal announcement later in the day.
ESPN reported Sunday that Cal already enlisted the aid of a search firm to find a successor in case Montgomery decides to step down.
Montgomery still has two more years left on his current contract.
Montgomery, 67, ranks fourth among Division I head coaches with 677 wins. He trails only Mike Krzyzewski, Jim Boeheim, Roy Williams and Rick Pitino.
Montgomery took the Bears to the NCAA Tournament in four of his six seasons at Cal, though they failed to reach the NCAA tournament this season. The Bears finished 21-14, including 10-8 in the Pac-12. They won two games in the NIT before losing to SMU.
Cal won its first regular-season conference title in 50 years in 2010 under Montgomery.
Prior to Cal, Montgomery coached the Golden State Warriors for two seasons following a highly successful coaching stint at Stanford. The Cardinal got to the Final Four in 1998 and the Elite Eight in 2001 under Montgomery.
Montgomery had bladder cancer surgery in 2011.