Prior made the last of his 79 Test appearances against India at Lord's 11 months ago before undergoing surgery on his Achilles tendon.
He had hoped to return to action with Sussex in this season's County Championship, but having failed to recover full fitness, he has decided to walk away.
"Today is a very sad day for me, as I am forced to announce my retirement from the game I love," Prior said in a statement released by the England and Wales Cricket Board (ECB).
Prior made his England debut against the West Indies at Lord's in May 2007 and marked the occasion with a maiden century.
He went on to play a key role in three Ashes triumphs and hit a further six Test centuries during a period that saw England climb to the top of the International Cricket Council ranking in 2011.
In total he scored over 4,000 Test runs and claimed 256 dismissals, putting him second behind only Alan Knott (269) among England wicketkeepers and ninth on the all-time worldwide list.
"I also feel privileged to have been involved in an era of such success for English cricket."
Prior thanked his "family, team-mates, coaches and the people behind the scenes", as well as "cricket fans both at home and abroad", and said he had created "friendships that will last forever".
