D'Offay funded Rachel Whiteread's Monument for Trafalgar Square

Mr D'Offay, 61, is seen as one of the leading figures in British art, representing key artists like Rachel Whiteread, Ron Mueck, Howard Hodgkin and Anselem Kiefer.

The retirement comes as the D'Offay Galleries are thriving and is a shock, even in art circles.

"D'Offay was crucial and this is going to leave a yawning gap in the London Gallery scene," said Louisa Buck, art critic and author of Moving Targets II, a guide to contemporary art in Britain.

D'Offay is famed for bringing star exhibitions to his relatively small gallery through his friendships with key artists from an early stage in their careers.

Acclaimed British painter Howard Hodgkin is a client

There is a great deal of speculation in London art circles as to why D'Offay has chosen to retire at this relatively early age and when his business is doing so well.

The Sheffield-born dealer has recently hosted an exhibition by Bill Viola that had 50,000 visitors and helped fund Rachel Whiteread's monument in Trafalgar Square.

Elsewhere he had 11 artists at the Venice Biennale and was behind acclaimed exhibitions by Jeff Koons and Ed Ruscha at the Edinburgh Festival.

The dealer himself says there is no reason other than wanting to step down while the going is good.

"There is never a good time to announce one's retirement but I would rather step down when the gallery is at its height and I feel that now is the right moment," he said.

Jeff Koons' exhibition at Edinburgh was organised by D'Offay

It may be that the willingness on the part of a new breed of public galleries to take up new artists may have dented D'Offay's remit.

Artists he has been associated with in the past include Willem de Kooning, Lucien Freud, Andy Warhol, Joseph Beuys, Georg Baselitz and a host of other illustrious contemporary artists.

But D'Offay has said he will remain involved in the art world and says he will be offering a "support service" to artists.

"He is famous for being a distinct and quirky individual and his reasons will be his own," said Buck.