The NIH will also not breed the apes, and in five years will review whether those 50 chimps are still necessary.
Animal rights advocates cheered the decision.
“This is an historic moment and major turning point for chimpanzees in laboratorie — some who have been languishing in concrete housing for over 50 years,” said Wayne Pacelle, president and chief executive of the Humane Society of the United States, in a statement.
Justin Goodman, president of PETA's laboratory investigations department, added that it "has brought the U.S. one step closer" to ending tests on the animals.
"It is wrong to torment living beings whom we know suffer greatly from physical, behavioral, and psychological deprivation in laboratories," he said in a statement.
Chimpanzees are humans' closest animal relative, sharing up to 98 percent of our DNA.
That similarity has made them appealing subjects for research, through scientists have begun to question their use.
"Chimpanzees are very special animals," Collins said. "We have learned much about ourselves by careful study of their behavior and their biology."
In a 2011 report, the Institute of Medicine found that "most current biomedical research use of chimpanzees is not necessary."
That report led to an NIH working group's review of chimpanzees' use. In January, the panel recommended retiring of most of its chimps.
The NIH decision is the second major action to affect the use of chimps in research and commercial activities.
Earlier in June, the Fish and Wildlife Service proposed listing all chimpanzees as endangered. Previously only those in the wild were considered endangered; chimps in captivity were "threatened," a status that assured them fewer protections.
In addition to the decision to retire most of the chimps, the NIH also pledged to implement new standards for the 50 it will keep for research. The agency will only use chimps if the research will aid public health and as a last resort. Chimps for future research must also be kept in facilities similar to their natural environment.
Current projects that use chimpanzees will be wound down, Collins said.
It will take years for the agency to retire its animals; current sanctuaries are not prepared to deal with them.
"This is not something that's going to happen quickly," he said.
The NIH is also facing a $30 million cap on spending for chimpanzee sanctuaries under the 2000 CHIMP Act, which it expects to hit soon. That limit is a "challenge," Collins said, but the agency is looking for Congress to allow it to pay for the chimps' care.
Housing chimpanzees in sanctuaries is not expected to cost more money than keeping them for research, but will shift costs.
Addressing the CHIMP Act limit will be a "priority," Humane Society Vice President of Animal Research Issues Kathleen Conlee told The Hill.
"I think people are under the impression that the space is already created, but until there was a commitment that the chimps were going to go there, it didn't make sense to build," she explained.
Primate centers that use chimpanzees have opposed the NIH decision, arguing that it is based in bad science and would cost too much money.
Keeping 50 chimps for research "is not sufficient" to develop medical breakthroughs, the Texas Biomedical Research Institute said in a statement.
"As the number of chimpanzees eligible for research decreases below 50 as a result of death from natural causes, the pace of research will be slowed even more, and human and chimpanzee lives will be lost unnecessarily due to delays in bringing new drugs and vaccines to market," the institute added.
Chimpanzees may be used in future research for Hepatitis C and behavioral issues, Collins noted.
—This story has been updated.