Forlan, who scored 36 goals in 112 matches for Uruguay during a 13-year international career that included three World Cups, announced his decision at a news conference in Japan where he plays for Cerezo Osaka.
"It was a very difficult decision, having worn the Uruguay shirt for so many years, more than I could have dreamed of," the 35-year-old said in the conference broadcast on his personal website (www.diegoforlan.com).
"I know it’s an opportune moment to retire from the ‘seleccion’. Lots of important things are coming up like the Copa America and the qualifiers for the next World Cup.
"I believe it’s important to make way for the new generations and this generational change that is going on in the national team,” said Forlan, who last played for Uruguay at the 2014 World Cup finals in Brazil.
Forlan, son and grandson of former Uruguay internationals, reached his peak at the 2010 World Cup finals in South Africa, where he was voted best player in FIFA poll.
Uruguay, world champions in 1930 and 1950, had enjoyed little international success since their semi-final place at the 1970 tournament in Mexico.
Forlan was the symbol of Uruguay's revival under coach Oscar Washington Tabarez, also winning the Copa America in Argentina four years ago.
Uruguay will defend their Copa America title in Chile in the tournament starting on June 11.
Forlan joined Osaka last year, having played for Independiente, Manchester United, Villarreal, Atletico Madrid, Inter Milan and Internacional.
(Reporting by Esteban Farat; Writing by Rex Gowar in Buenos Aires; Editing by Nick Mulvenney)
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