"We've come to the conclusion that cigarettes have no place in a setting where healthcare is being delivered," he said.
The company declined to say what will take tobacco's prominent shelf place behind cash registers at the front of its stores. CVS Caremark will test some items and may expand smoking cessation products that are already sold near cigarettes.
CVS Caremark has been working to team up with hospital groups and doctor practices to help deliver and monitor patient care, and the presence of tobacco in its stores has made for some awkward conversations, CVS Chief Medical Officer Dr. Troyen A. Brennan said.
"One of the first questions they ask us is, 'Well, if you're going to be part of the healthcare system, how can you continue to sell tobacco products?'" he said. "There's really no good answer to that at all."
The company's announcement drew praise from President Obama, who said in a statement that he applauded the news.
"As one of the largest retailers and pharmacies in America, CVS Caremark sets a powerful example, and today's decision will help advance my Administration's efforts to reduce tobacco-related deaths, cancer, and heart disease, as well as bring down healthcare costs - ultimately saving lives and protecting untold numbers of families from pain and heartbreak for years to come," the president said.
CVS Caremark competitor Walgreen Co., the nation's largest drugstore chain, sells tobacco, as does the world's largest retailer, Wal-Mart Stores Inc., which also operates pharmacies in its stores. But Target Corp., another major retailer with pharmacies in its stores, does not.
Most independent pharmacies also do not sell tobacco, according to the National Community Pharmacists Association.
Several cities, including San Francisco and Boston, have considered or passed bans on tobacco sales in stores with pharmacies. Other places like New York City have sought to curb retail displays and promotions and raise the legal age someone can buy tobacco products.
On the flip side, discounters such as Family Dollar have started selling tobacco over the last couple years. They note that smokers make more frequent stops at retailers, and their customers are more likely to be tobacco users.
U.S. retail sales of tobacco, which is comprised largely of cigarettes, were about $107.7 billion in 2012, according to market researcher Euromonitor International. Less than 4% of retail cigarette sales come from drugstores like CVS and Walgreens.
The share of Americans who smoke has fallen dramatically since 1970, from nearly 40% to about 18 percent. But the rate has stalled since about 2004, with about 44 million adults in the U.S. smoking cigarettes. It's unclear why it hasn't budged, but some market watchers have cited tobacco company discount coupons on cigarettes and a lack of funding for programs to discourage smoking or to help smokers quit.
Tobacco companies also have increasingly relied on their packaging and displays at retailers to build brand loyalty and grab consumers because it is one of the few advertising levers left to them after the government curbed their presence in magazines, billboards and TV.