The couple said in a statement Tuesday that the separation was sad but amicable. They plan to share custody of daughters Savannah, 9 and Isla, 7.
The 42-year-old Phillips is the son of Princess Anne and will be the first of the queen's eight grandchildren to divorce. Three of the monarch's four children had marriages that ended in divorce, including Anne, who split from first husband Mark Phillips in 1992 and married naval officer Timothy Laurence, her second and current spouse.
Peter Phillips married Canadian management consultant Autumn Kelly at Windsor Castle in 2008.
Announcement of their separation comes after a tumultuous few months for Britain's royal family. Last month the queen's grandson Prince Harry and his wife Meghan quit royal duties, saying they wanted to seek financial independence and spend more time in North America.
The queen's second son, Prince Andrew, also stepped down from royal duties in November amid controversy over his friendship with the late convicted sex offender Jeffrey Epstein.