A 20-year-old back-up dancer for the Wiggles will become the group's first female member,
The band members - Anthony Field, Jeff Fatt, Murray Cook and Greg Page - have openly expressed their concerns about the rigours of touring in recent years.
Emma Watkins will be the new yellow Wiggle alongside two other performers - Lachlan Gillespie and Simon Pryce - who will replace Cook and Fatt.
The shock announcement about the retirement of three of the Wiggles comes only four months after the band controversially dumped its youngest member, Sam Moran.
Only the Blue Wiggle, Anthony Field, will remain.
Speculation about the band's line-up changes mounted throughout the morning, with the Wiggles finally releasing a statement about their "new generation" of performers.
A statement on their official website said the Wiggles would embark on a Celebration Tour at the end of the month with shows planned for Singapore, Britain, US, Canada and New Zealand. The group will head home for their final Australian tour in November and December.
"Jeff, Murray and Greg will then hand over the purple, red and yellow skivvies to a new generation of performers to instead take on backstage creative roles," the statement said.
"Anthony will continue on stage as the Blue Wiggle alongside Emma Watkins, Lachlan Gillespie, and Simon Pryce, who have been handpicked by the group to become the Yellow, Purple and Red Wiggles."
"We’ve been entertaining children around the world for 21 years and it's important that we plan for the future so that The Wiggles can keep wiggling in the years to come," Cook said.
"The touring and performing over the past 21 years has meant that we've spent a long time away from our own families and friends. We miss them and want to spend more time at home, which is a major reason why three of us decided it was time to hand on our skivvies to a new generation."
A spokesman for the Wiggles said: "They always said they'd have to hang up their boots at some point."
The oldest member of the band, Fatt, is 58.
Field, 49, has also revealed the effects of a serious battle with depression, which led to him suffering during touring, including sometimes "bawling my eyes out in the dressing room".
News of changes to the band does not mean the Wiggles empire - television shows, DVDs, music releases and children's merchandising - will not continue. The business is expected to carry on unabated.
The band, which celebrated 20 years in the children's industry last year, has been one of Australia's biggest entertainment success stories. All five members - including Page and Moran - were inducted into the ARIA Hall of Fame last year.
At the peak of their success, the Wiggles were named Australia's top earning entertainers for four years running, with earnings of up to $45 million per year.
Their fortune includes takings from continuous live touring here and overseas, with the four band members sometimes performing more than 500 shows a year.