The New York Times journalist Judith Miller, whose reporting on weapons of mass destruction, and alleged dissembling before a grand jury, raised questions about the credibility of both her work and her newspaper, has "retired".

Miller's departure follows weeks of negotiations and public criticism of her work by the paper's editor, columnists and reader's editor that has damaged the reputation of one of the nation's most venerated journalistic institutions.

The controversial 28-year career of Miller at the Times ended with a letter to the editor, that was published yesterday, in which she defended her record. This was part of a deal that also included an undisclosed pay-off and a letter from the editor, Bill Keller, "clarifying" his criticism of her. She told the New York Observer she was "really very satisfied" with the arrangement, posting her letter on her own website, so scooping the paper on the story.

Miller would not respond to email requests for an interview, and the Times refused to put through calls to its press office on the matter. But those close to the negotiations say that originally she demanded an essay to rebut her critics. She settled for a letter entitled "Judith Miller's farewell" where she claimed that her main reason for leaving was because she had become "the news, something a New York Times reporter never wants to be".

Her return to the paper after she was released from jail for refusing to reveal her source in a CIA-leak case, became increasingly untenable, threatening open revolt in the newsroom and a rift between the publisher, Arthur Sulzberger, and Keller. Indeed Miller's principal leverage in the negotiations was the threat that she might come back to the paper and exacerbate the tension.

One Times staffer said: "If she tried to write I don't see how that could have worked. Whatever happened would not have been good for her or the paper."

But while the immediate issue of her future at the paper has been settled, the rancour between Miller and the paper remains. She told the New York Times she was now "free" from the "convent of the New York Times, a convent with its own theology and its own catechism", and that she had received several offers "of all kinds" for new jobs in the few hours since her "retirement" had been made public.

Miller's reporting in the run up to the Iraq war was widely slated for being insufficiently critical of the Bush administration's claim that Iraq held weapons of mass destruction. The paper later published a correction for its coverage in which three of the five pieces mentioned were written or co-written by her.

She became the subject of even more intense criticism within the paper over the involvement in the recent high-profile case into the outing of the covert CIA agent, Valerie Plame. Miller went to jail as an alternative to revealing her source in the case - only to emerge and name her source, which made many believe she was trying to rehabilitate her reputation.

The episode raised serious questions about both the competency of Mr Sulzberger, a close friend of hers, and the authority of Keller. Despite staking huge amounts of money and credibility in her defence, neither man asked her about the substance of her conversations with Lewis "Scooter" Libby, the former chief of staff to the vice-president, Dick Cheney.

"Arthur wanted this to be his Pentagon papers," said one Times staffer, referring to the top-secret dossier documenting US involvement in Vietnam leaked to the Times in 1971.

Mr Sulzberger told Times reporters that Miller had "had her hand on the wheel" during the legal process. He later claimed that his quotes had been taken out of context in his own newspaper.

In a memo to staff three weeks ago Keller said he had ordered Miller to stay away from security related stories, though she kept writing them. He also accused her of having misled her editor and said he wished he had known more about her "entanglement" with Mr Libby, who was indicted over the leaking of the identity of the CIA agent. On Wednesday, he said he had not intended "to suggest an improper relationship with Libby", and that he "did not contend that she misled him".

Miller said she was gladdened by Keller's statement. "Some of his comments suggested insubordination on my part. I have always written the articles assigned to me, adhered to the paper's sourcing and ethical guidelines and cooperated with editorial decisions, even those with which I disagreed."

She said she needed a break. Then she took her place on a panel before media lawyers and journalists sponsored by the Media Law Centre in Manhattan.