The 33-year-old, known as the "engine room" in two Ashes-winning sides, has been suffering with an Achilles tendon injury and has not played since last year.
"Today is a very sad day for me as I am forced to announce my retirement from the game I love," Prior, who was also an aggressive middle-order batsman, said.
"I had been hoping and expecting to be fit for the start of the 2015 season. Unfortunately, this has proved impossible, and I have now had to reach this decision."
Prior played 79 tests for England, the first in 2007 against West Indies when he made 126 not out and the last against India at Lord's last year.
Only Alan Knott claimed more dismissals for England than Prior's 256 while Prior also made 4,099 Test runs.
(Reporting by Martyn Herman; editing by Amlan Chakraborty)
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