Costello, 34, made his debut for Ireland against the USA in 1996 and went on to win 39 caps for his country. He made his provincial debut for Connacht in 1993 and toured with Ireland to Australia in 1994.
After a short spell with London Irish in 1996, he returned to Ireland with Leinster and has made 121 appearances for the province.
Costello is also an Irish Athletics International and represented Ireland in the shot putt in the Barcelona Olympics in 1992.
Ireland coach Eddie O'Sullivan said: "Victor Costello has enjoyed an incredible sporting career of which rugby has played a huge part. He was one of the most talented athletes in world rugby and played a big part in the recent success of the national team, none more so than ar the Rugby World Cup in 2003. I wish him every success in his future career plans."
Leinster Chief Executive Mick Dawson also paid tribute to the Leinster stalwart: "Victor Costello is one of the true legends of Irish sport. He can look back on a career that has transcended the amateur days right through to the professional era with great pride having served his country and his home province with distinction over the years.
"His place in Leinster folklore was confirmed when he earned his both his 100th provincial and his 50th Heineken Cup caps last year and he has played an important role in this year's campaign.
"On behalf of everyone involved in Leinster Rugby I would like to take this opportunity to wish Victor, his mother Marie and all his family well in the future and to thank him for his outstanding service to both the green and blue shirt."