"As some have noted, my own `slate' is pretty full at the time, and I therefore determined that it is a good time to exit," he said.
The sale, announced after the market closed, ends a nearly two-year legal battle for control of the Santa Monica-based movie studio.
Lions Gate shares were down in after-hours trading.
The sale included an agreement for both sides to drop all pending lawsuits against each other.
Lions Gate and its next largest investor, Mark Rachesky, each agreed to buy back a quarter of Icahn's shares for $7 each, which is about what Icahn spent acquiring his one-third stake in the company.
Lions Gate said that it has the right to designate one or more parties to purchase Icahn's remaining stake, also at $7 a share, over the next 35 days.
Icahn is also the largest shareholder in Clorox and is seeking election to the board of that company. He said Tuesday that he would vote to sell Clorox if appointed - or he would buy it himself.
The Associated Press contributed to this report.