In a statement shared to their Instagram account, the couple revealed they intend to work to become "financially independent".
But the news has left royal fans with many questions: Where will they live? How will it all work? What will they do?
Where will they live?
The couple said in their statement that they will be dividing their time between the UK and North America.
Meghan and Harry have been living in Frogmore Cottage, owned by the Queen, in Windsor.
They will continue living there for the part of the year they are in the UK.
The other part of the year, they'll be spending their time in Meghan's native America - most likely in Canada, where they recently spent six weeks over Christmas.
The couple's statement said: "This geographic balance will enable us to raise our son with an appreciation for the royal tradition into which he was born, while also providing our family with the space to focus on the next chapter."
What will they do and which duties will they still be doing?
Even though the couple said they intend to step back from royal duties, they will still "continue to collaborate with Her Majesty The Queen, The Prince of Wales, The Duke of Cambridge and all relevant parties".
According to their new website, Meghan and Harry will continue to "reflect their sense of duty and allegiance to The Monarch and her legacy in the world".
They will support the Queen by "continuing her efforts to draw special attention to these groups as patrons of multiple organisations", which include the Invictus Games Foundation, Royal Marines and the National Theatre.
Meghan and Harry will continue their work in the Commonwealth by meeting "with young leaders to hear their insights and propel their vision for lasting change".
They will also continue their charitable work to support the community.
The couple have flagged three areas of interest - the environment's well-being, societal well-being including mental health, combating the HIV crisis, the armed forces and sport for social development and the empowerment of women and girls.
Will they keep their royal titles?
There's been much speculation over whether the couple will keep their royal titles.
It's not clear yet whether Meghan and Harry will lose their titles when they step back from their roles.
BBC's Royal expert Ms Campbell said on BBC News: "We don’t know, we will have to wait for them to clarify. I can’t be absolutely 100 percent because this is a shock, this is a surprise."
What's in store for their son Archie? Where will he go to school?
Many fans are wondering what Meghan and Harry's decision will mean for their son Archie? Will he become a Canadian citizen? Where will he go to school?
The couple confirmed they will be "balancing" their time between the UK and North America.
According to royal protocol, Archie - like his dad - is a fully-fledged British citizen so it's unlikely he will become a Canadian citizen.
They are classified as internationally protected people which mandates this level of security.
As for school, it's been suggested Archie may attend a private school or even a public school in Canada if they decide to settle in the country.
In Canada, schooling starts at age six so there's still a few years before the couple decide where to send their son.
Or, the couple could choose to keep their son schooled in the UK and he may attend the same private schools as his dad.
Will they still receive funding through Sovereign Grant?
The couple - who have an estimated combined net worth of £34 million - have been receiving funding through the Sovereign Grant, which is given to royals to perform their duties.
This will no longer happen.
It's been reported that the couple will step away from the royal family with an estimated £5.5 million a year in Royal funds and they said they will work to become "financially independent".
On their website, the couple detailed that travel arrangements in their private time will continue to be paid for privately and not by UK taxpayers just like it always has been.
All their official overseas visits will be paid for by the Sovereign Grant as they are in support of the Queen's Government's objectives.
The couple's security will also be funded because they are "classified as internationally protected people which mandates this level of security".
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