The Vatican said Pope Benedict XVI had agreed to Cardinal Zen's retirement as Bishop of Hong Kong for reasons of age.
An outspoken advocate of democracy and religious freedom in China, the cardinal has been a vocal champion of human rights and social justice.
During his tenure, the 77-year-old cardinal criticised both the governments in Hong Kong and Beijing.
Local media quoted him as saying he planned to concentrate on advising the Pope on church affairs in mainland China after his retirement.
But he stressed he would not interfere in Vatican-Chinese relations, as they were a diplomatic matter.
"It is not something I can help," he was quoted as telling reporters last week. "It is not something that I can get involved in."
There are no formal diplomatic relations between Beijing and the Vatican.
Catholics in China are split between a state-sanctioned Church and an underground Church that rejects government ties and answers only to the Pope.
The cardinal has been succeeded by Bishop John Tong Hon, 69.
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