"There have been some bumps in the road but we are headed in the right direction," he said.
Calhoun will take a transition appointment through next spring as a special assistant to athletic director Warde Manuel. When fully retired, he will become head coach emeritus.
Calhoun has been slowed repeatedly by illness and accidents in recent years, including a fractured hip last month. He said the hip injury didn't cause him to retire, but gave him time to reflect on whether this would be a good time to leave.
"As I looked at everything. So many things are in place for us to even go farther that we have already," he said. "So I thought it was an excellent time."
Assistant coach Kevin Ollie, who played point guard for Calhoun from 1991-95, will be the Huskies' new coach. His contract runs through next April 4 and he will be paid $625,000.
He takes over a team that returns only five players who saw significant playing time a year ago and failed to qualify academically for the 2013 NCAA tournament.
"I am very honored and humbled to become the UConn men's basketball coach," said Ollie. "I cannot put into words how grateful I am to coach Jim Calhoun, who retires today as one of the most legendary coaches in the history of college basketball. Coach Calhoun brought me here to Connecticut as a person right out of high school and has mentored me into the person I have become today."
Despite the school's problems and uncertain future, Calhoun who coached UConn's latest title winners just last year got a heartfelt send off.
"This is a day of sorrow, celebration and admiration," Connecticut President Susan Herbst said.
Players echoed the sentiment.
"Coach Calhoun is a great coach, one of the greatest ever in college basketball, and it was an honor to play for him," said sophomore forward DeAndre Daniels. "I think everybody's still in shock right now and just don't really believe it."
Ollie is one of more than two dozen players whom Calhoun sent to the NBA, a list includes everyone from Reggie Lewis at Northeastern, to Cliff Robinson, Ben Gordon, Emeka Okafor, Rudy Gay and Kemba Walker.
Associate head coach George Blaney plans to stay on and help Ollie.
"No one ever thought that UConn could become a national power, one of the top-five programs in the nation," Blaney said. "Now you look at what this school has become, the type of students that they have, the buildings, even the image of the state, so much of that is attributable to the success of his basketball program."
Calhoun was hired by UConn in May 1986, after spending 14 years at Northeastern where he transformed the team from Division II program to a mid-major power with five appearances in the NCAA tournament.
He won an NIT title in his second season. His teams won 10 Big East regular-season championships and seven Big East Tournament titles.
"The thing that stands out to me is it's one thing to take over a Duke or a Kentucky and build it and win games and win championships," said Syracuse coach Jim Boeheim, who went into the Hall of Fame with Calhoun in 2005. "But 26 years ago Connecticut wasn't even thought of in the college basketball world. He's turned them into one of the top programs in the country. I think it's really, to me, the greatest building job that anybody's ever done."