The move will create two separate, publicly traded firms by the end of 2021, according to the US computing giant.
"IBM is laser-focused on the $1 trillion hybrid cloud opportunity," said IBM chief executive Arvind Krishna.
"Now is the right time to create two market-leading companies focused on what they do best. IBM will focus on its open hybrid cloud platform and AI capabilities."
The infrastructure firm, he said, "will have greater agility to design, run and modernize the infrastructure of the world's most important organizations."
The move positions IBM to ramp up competition in cloud computing against rivals such as Amazon, Microsoft and Google.
"We have positioned IBM for the new era of hybrid cloud," said IBM executive chairman Ginni Rometty.
"This focus will result in greater value, increased innovation, and faster execution for our clients."
IBM shares surged seven percent in early trade on the news.
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