Benedict told the crowd of about 100,000 that he was not abandoning the church and would enter a life of prayer.
The 85-year-old pope is retiring from his post in a move that has not been seen for 600 years.
The Associated Press said the pope claims he is too frail to lead the world's 1.2 billion Catholics.
The pope opened his Angelus prayer with a short sermon about Jesus' Transfiguration.
The story holds that Jesus took his disciples to a mountain and was transformed and filled with light.
Benedict told the cheering crowd that he must do the same.
"The Lord is calling me to go on top of the hill, to dedicate myself once more to prayer and meditation," he said, reported CNN.
"But this does not mean to abandon the church."
The pope will spend the rest of his days in Vatican City in a private apartment in seclusion and contemplation.