Riddell lost via a rear-naked choke submission to Renato Moicano at UFC 281 on Sunday in the first round - his third-straight stoppage defeat in the UFC.
The 31-year-old conceded in a social media post the loss was a reflection of where he is at mentally in the brutal sport.
"I’m going to step away from competing in MMA for a good while until the fire to compete comes back," Riddell wrote.
"I’m not performing close to my capability, and it’s a dangerous job if you’re not fully present. I’ve been training hard for 15 years, in and out of camps with not enough rest or balance and it’s massively taken its physical and mental toll on me. There has not been a year since I was 17 that I have not fought.
"I know this is the right choice because, as I write this, I feel a sense of relief for finally voicing what I had been feeling for a while."
Riddell added there were "a few overdue surgeries" to be addressed as well.
"I will keep training and teaching, but my energy that was all-consumed by the sport will be directed at my family.
"The itch will come back, But a long time off is needed."
Riddell was making a name for himself in the octagon after earning four straight wins in the UFC since making his debut at UFC 243.
However "Quake" hit a brutal speedbump last December in the form of a spinning wheel kick from Rafael Fiziev which left with a knockout loss; defeats to Jalin Turner in July and Moicano on Sunday since have left his UFC record at 4-3 and overall record at 10-4.
"I wanted to have one last crack at MSG [Madison Square Garden] to see if the feelings from the last camp were just one-off, but sadly they were not.
"It’s a hard pill to swallow, as this is what I’ve done my entire life and fighting was my first love.
"But sometimes you just have to face it."
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