The proposal prompted regulators to halt trading in the company's stock on Thursday.
Musk dropped the bombshell in a post on Twitter - saying he has secured the funding to buy all of Tesla's stock at $420 per share.
"Am considering taking Tesla private at $420. Funding secured," Musk wrote in his first tweet, following up with "good morning" and a smiley emoji.
He said that the transaction is contingent on a shareholder vote to make it official.
Tesla later published a letter from Musk to his employees explaining the rationale behind his plan.
"As a public company, we are subject to wild swings in our stock price that can be a major distraction for everyone working at Tesla, all of whom are shareholders," he wrote.
"Being public also subjects us to the quarterly earnings cycle that puts enormous pressure on Tesla to make decisions that may be right for a given quarter, but not necessarily right for the long-term."
The initial announcement saw a surge in Tesla stock before trading was halted by regulators of the Nasdaq stock market.
Musk later brought some clarity to the situation in an email to Tesla employees that was also posted on Tesla's blog.
Trading in Tesla's stock resumed shortly after, and the stock climbed 11 per cent to $379.57.
Musk's announcement was initially met with widespread scepticism, with many people connecting the proposed $420-per-share offer with 420 being a common slang term for marijuana.
Musk also previously used his Twitter account to joke that Tesla was going bankrupt in an April Fool's Day tweet and his stability was called into question last month after he called a British diver who helped rescue children from a Thailand cave a pedophile.
Asked on Twitter whether Musk would continue to be CEO under such a scenario, he replied there would be "no change."
