The outgoing head of UNESCO, Irina Bokova, called the United States withdrawal a "loss to multilateralism", while UN Secretary General Antonio Guterres said through a spokesman that he "regrets this development deeply".
Until that time, the United States, which provides around $80 million to UNESCO annually, will remain a full member.
The "Department of State notified UNESCO Director-General Irina Bokova of the U.S. decision to withdraw from the organization and to seek to establish a permanent observer mission to UNESCO", State Department spokesperson Heather Nauert said. It cited US belief in "the need for fundamental reform in the organization".
Netanyahu accused UNESCO of "becoming a Theater of Absurd because instead of preserving history, it twists it".
The organization has voted through several decision that have enraged Israel, particularly resolutions that appear to downplay or omit the importance of holy sites in Jerusalem and West Bank to Judaism.
Hours later, Prime Minister Benjamin Netanyahu said Israel would quit too, calling the USA decision "brave and moral".
Israel's ambassador to the United Nations, Danny Danon, also praised Washington's move as heralding "a new day at the U.N., where there is a price to pay for discrimination against Israel".
He said: "Unesco has become a battlefield for Israel bashing and has disregarded its true role and goal". As Foreign Policy magazine points out, the USA made a decision to pull out of the agency in 1984 during the Reagan administration, which at that time complained of - in the words of Foreign Policy - "corruption and what it considered an ideological tilt toward the Soviet Union against the West".
Citing lines in UNESCO's 1945 Constitution by US Librarian of Congress Archibald MacLeish - "since wars begin in the minds of men, it is in the minds of men that the defences of peace must be constructed" ¬- she said this vision has never been more relevant, and added that the US helped inspire the 1972 UNESCO World Heritage Convention.
The United States said Thursday that it was pulling out of the UN's culture and education body, accusing it of "anti-Israel bias" in a move that underlines Washington's drift away from worldwide institutions.
UNESCO is best known for designating World Heritage Sites such as the ancient city of Palmyra in Syria and the Grand Canyon National Park. "We deeply regret that the United States chose to leave UNESCO", the communique said.
UNESCO's executive board plans to select her successor Friday in a secret ballot.
Leaving UNESCO might seem like typical Trump isolationism, but the U.S.'s beef with the organization goes back to previous administrations. The U.S. rejoined in 2003 under then-President George W. Bush.
The US has long used UNESCO as a stage for political gestures: In 1984, the Ronald Reagan withdrew the US from UNESCO, accusing it of being pro-Soviet, anti-Israel, and anti-free market.
The U.S. told Bokova it intends to stay engaged as a non-member "observer state" on "non-politicized" issues, including the protection of World Heritage sites, advocating for press freedoms and promoting scientific collaboration and education.