Reports emerged earlier today claiming that the full-back has agreed to join Top 14 side Toulon after seven senior years with the Blues.
Now, the Welsh outfit have confirmed that the 25-year-old will call time on his career with the club, where he made 87 appearances and scored 568 points for the region.
Chief executive Richard Holland told the club's official website: "Retaining Leigh has been one of our highest priorities and we have done all we can in our power as a region and business to try and facilitate that.
"His outstanding performances for Blues, Wales and the Lions have made him one of the most prized players in world rugby. We put our very best offer on the table but he has been the target of a major European club with significant resources that we simply cannot compete with at this current time.
"Leigh has been a fantastic servant to the Blues and I know how hard a decision this has been for him. He has been presented with a tremendous opportunity to play overseas and feels this is the right move at this stage in his career. He will go with our very best wishes for success with his new club."
Halfpenny, who has earned 48 caps for Wales and three for the British and Irish Lions, was recently given the Player of the Year Award for 2013 by the Rugby Union Writers' Club.