The Boyne centre/winger, 33, won his first Leinster cap against Ulster in August 1998 and he went on to win a brace of Celtic League (2001/02 and 2007/08) and Heineken Cup (2008/09 and 2010/11) honours over the next 13 years.
He made 87 Heineken Cup appearances (scoring 27 tries) and was the first Leinster player to reach the double century cap mark.
He made the last of his 207 Leinster appearances (in which he scored 71 tries and 1 drop goal) in the 2011 league grand final at Thomond Park.
For Ireland, Horgan won the first of his 65 caps against Scotland in February 2000 (where he went on to score 21 career tries).
He was selected for both the 2003 and 2007 Rugby World Cups where he would in total make eight appearances (scoring two tries). In all he was a part of three Triple Crown winning sides.
Commenting on the announcement, Shane said: "Every professional sportsman realises that at some point their career will come to an end.
"I have been extremely fortunate to have played regularly for my province and with Ireland since my debut with Leinster in 1998 and while I am disappointed that injury has forced me to retire now, I know I have been very lucky to have had such a long and largely injury-free career.
"The support and expertise of the medical and fitness teams in Leinster and Ireland through the years has been first class. Their help, especially through the course of this injury, has been incredible.
"It has been a tremendous honour to represent my province and my country. When you first start playing sport that is the ultimate ambition but few people are lucky enough to realise it.
"I am just so grateful that I was given that opportunity. I am equally fortunate to have played at a time when Leinster and Ireland experienced such great success and alongside a group of players with unprecedented talent and ambition."
He added: "I want to thank the IRFU and Leinster, my playing colleagues and friends in the game and the many people who helped to shape and influence my career at different points over the last 14 years.
"I would also like to thank Lansdowne FC and my home club of Boyne RFC for their continuous support since I started playing the game.
"My family has always been my principal guiding influence and support, so public acknowledgment today is but a small element of the appreciation I owe them.
"To perform at the top of any professional sport players need good coaches and Ireland has been well served during my time with the national squad.
"At Leinster, to have played under Mike Ruddock, Matt Williams, Michael Cheika and, as it turned out for the last season of my career, Joe Schmidt, represents the kind of good fortune that only 'lucky' players get.
"My final expression of thanks is to the supporters of both Ireland and Leinster with whom I have shared some special days that I will never forget."
Leinster Rugby Chief Executive Michael Dawson said: "It is a sad day whenever a player has to retire prematurely, but Shane can look back on his long career with great pride.
"He was an integral part of both the Leinster and Ireland teams for a sustained period of time and his selection for the 2005 British & Irish Lions tour to New Zealand - where he earned three caps - was a high accolade which was richly deserved.
"For many supporters, Shane will be remembered for his outstanding feats on the international stage and it is somewhat fitting that his playing career finished on a high when he was invited by captain Leo Cullen to join himself and Gordon D'Arcy on the winners' podium to receive the Heineken Cup trophy at the Millennium Stadium last year.
"That gesture summed up the high esteem in which Shane was held and continues to be held by his peers.
"An outstanding ambassador for Meath, Leinster and Ireland, on behalf of everybody involved with Leinster Rugby I would like to thank him for his outstanding service to Leinster Rugby.
"It goes without saying that we wish Shane well with his future and I know that he will continue to make a positive impression in whatever field he decides to pursue."
Leinster head coach Joe Schmidt added: "As one of the longest serving players in the professional age, Shane will no doubt go down as one of the greats of Leinster and Irish rugby. He was a strong leader within the group whose contribution off the field mirrored his many feats on it.
"It was great to be involved with Shane last season where his performances contributed so much to the success of the team. It was fitting that his final season culminated in a second Heineken Cup success.
"The last year has been a frustrating one for Shane with knee surgery and long periods of rehabilitation. Unfortunately, despite his best efforts, he has been unable to regain full fitness.
"It is a testament to Shane that his professionalism and influence have continued to impact positively on the group during this season.
"A born winner and resilient competitor, Shane's retirement will no doubt leave a void in the group, but I know that his legacy of excellence and athleticism will continue to inspire future generations and we wish him all the best in the future."
Name: Shane Horgan
DOB: July 18, 1978
Birthplace: Bellewstown, County Meath
Height: 1.93 m (6' 4")
Weight: 104 kg (16 st 5 lb)
Club: Boyne RFC
School: St. Mary's, Drogheda
Leinster Caps: 207 (71 tries, 1 drop goal)
Leinster 'A' Caps: 2
Ireland Caps: 65 (21 tries)
British & Irish Lions Tourist: New Zealand (2005)
British & Irish Lions Caps: 3 (1 try)
Ireland 'A' Caps: 7
Ireland Under-21 Caps: 7 (1997/98 Triple Crown winner)
Ireland Youths Caps: 7
Leinster Youths Caps: 6