The 35-year-old was returned home early from Australia's recent one-day tour of England with a calf strain, the latest in a long line of injuries.
"You get to the point in life where you say enough is enough," he said.
Brett Lee with Andrew Flintoff
Lee made his Test debut for Australia against India in 1999 and his one-day bow the following year.
He had hoped to play in the World Twenty20 in Sri Lanka later this year, but his final appearance came in the fourth one-day international against England at Chester-le-Street last week.
"In a team environment you have to have 100% commitment, mentally and physically," Lee told Australia's Channel 9.
"Looking at the next few months, I just didn't have that desire any more. It wouldn't be fair on me, or my team if I went with that attitude."
At his peak, Lee was arguably the finest quick bowler in the world, and bowled the second-fastest recorded delivery of all time at 99.9mph in Napier, New Zealand, in 2005.