Spain is one of five European Union countries that refuses to recognise its independence, fearing that it could set a precedent for separatists at home.
Jose Luis Rodriguez Zapatero, Spain's prime minister, said on Friday that improved security conditions in Kosovo were also behind the decision to pull out troops.
Spain's defence ministry said the contingent would return in a "staggered and flexible manner", with most returning home by autumn.
Jaap de Hoop Scheffer, Nato's secretary general, criticised Spain for not discussing the move beforehand with Kfor, the alliance's peacekeeping force in Kosovo, while Washington said it was "deeply disappointed" with the decision.
A spokesman for the Spanish prime minister said Chacon would meet with de Hoop Scheffer next week to explain the reasons for the withdrawal.
Miguel Angel Moratinos, Spain's foreign minister, said on Monday that he had explained the move to Hillary Clinton, his US counterpart.
"Mrs Clinton's response was very positive," he said in an interview with Spanish radio and television.
"She understood the reasons that I explained to her and welcomed Spain's [military] commitments on the international stage."
Kosovo declared itself independent from Serbia last year, a move which has been recognised by 54 countries, including 22 of the 27 European Union nations.