Bertelsmann has agreed to buy the stake, with the acquisition valuing Penguin at around £2.8bn.
It ends Pearson’s near 50-year involvement with Penguin and marks the latest in a line of recent sales to become a pure digital learning company.
Pearson - which has also offloaded its media interests including the Financial Times Group and the Economist Group in recent years - said Mr Fallon will step down as boss in 2020 once a successor has been appointed.
Mr Fallon said: “There’s a lot still to do but we’re making good progress in navigating Pearson through a period of huge change.
“We’re now a much more efficient company, able to innovate more quickly and scale globally.”
Sidney Taurel, chairman of Pearson, added: “In some very challenging markets, John has worked tirelessly leading Pearson through a period of significant change and led its transformation from a media conglomerate to a single-focused learning company.”