Viewers saw Peggy make a surprise return on Friday night when she told her son Phil her cancer had returned.
Dame Barbara, 78, said she had thought "long and hard about it" but it was now time to say goodbye to the character.
She joined the soap in 1994 and played the character full-time until 2010. She has since made occasional returns.
Unlike her previous storyline, she will not win her cancer battle and will die from the disease.
"Peggy is a character close to my heart but I made the decision a while ago that I need to say goodbye to her once and for all, as otherwise she will always be …show more content…
Married three times, two of them portrayed on screen: Frank Butcher (divorced) and Archie Mitchell (murdered 2009)
Very protective of her troublesome clan. She has three children - sons Phil and Grant and daughter Sam - from Eric Mitchell, her first husband who died of cancer in 1985.
Her arch rival was Pat Butcher. They loved and loathed each other in equal measure, and both competed for the affection of Frank Butcher
Cancer battle: She learnt she had breast cancer in 1996 and had a mastectomy in 1999
Lowest point: When her son Phil set her beloved Queen Vic alight in September 2010
Catchphrase: "Get outta ma pub!"
Treadwell-Collins said: "Barbara is the real guvnor of EastEnders. So when she told me her decision back in the summer, we both had a little cry before getting excited about how Peggy Mitchell, the matriarch to end all matriarchs, could bid her final farewell to Albert