The singer, as well as the show's creator and co-mentor Simon Cowell, confirmed the news Wednesday night after it was rumored earlier in the day.
"I started the show being a singer and a musician, and so I'm going to go back to that," Lovato told reporters ahead of Thursday's (December 19) season-three finale, according to Billboard. "It's been really great, but I'm so excited for 2014. I'm going to dedicate it completely and entirely to music -- touring and making a new album. Possibly releasing one." (Lovato released a self-titled album earlier this year, spawning singles "Heart Attack" and "Neon Lights.")
It's the final week of X Factor!!! Here we goooo! Who's watching?! 💙💙 #xfFinal3
Cowell, who previously stated he's hopeful that the show will have a fourth season, added, "I always knew she wasn't coming back because she's touring, so I knew that."
With Thursday's finale being Lovato's last on the Fox singing competition show, she addressed what she'll miss most after she exits. She said, "Being able to sit next to [judges] Kelly and Paulina and see them twice a week, and also helping mentor the contestants."
Lovato joined "X Factor" in 2012, joining Cowell and L.A. Reid, who also appeared on season one, as well as fellow newbie judge Britney Spears. Spears and Lovato joined after season one's mentor shake-up. Following season two, Spears and Reid left the series and were replaced by Kelly Rowland and Paulina Rubio.
In addition to her mentor role on "X Factor," Demi has a recurring role on "Glee." The 21-year-old singer has already announced plans for her 2014 Neon Lights Tour where she will be joined by a number of "X Factor" alums, from both the U.S. and U.K. versions of the show, including Fifth Harmony, Little Mix and Cher Lloyd. It kicks off in February.