Chatfield made the decision after getting "slogged" all over the park playing for his local club Naenae Old Boys in Wellington on Saturday.
"It might seem silly but I have standards, even at 68, and if I can't play to those standards I thought it is time to flag it," he told New Zealand's Stuff Media on Sunday.
Renowned for his miserly bowling and nagging line and length, the fast-medium bowler acted as a superb foil to Richard Hadlee during the team's remarkable run of success during the 1980s.
It was his experiences with the bat, however, that cemented him in New Zealand's sporting folklore.
A confirmed number 11 batsman, he was struck on the head by a Peter Lever bouncer in his debut test against England in 1975 after combining with Geoff Howarth in a final wicket partnership of 44.
The delivery fractured his skull and his heart stopped beating. The England team physiotherapist Bernard Thomas performed CPR on Chatfield and saved his life.
The incident led to a debate about bowling bouncers to tailenders.
He also helped Jeremy Coney win the third test against Pakistan in 1985, scoring 21 as the pair put on the 50 runs required for victory after Lance Cairns had been struck on the head by a bouncer and hospitalised.
Chatfield had hoped to score a century before he retired but his highest was "50 something" in club cricket. He was dismissed for a golden duck in his final innings, although he said he did not want that innings reported.
He did, however, suggest a headline to the end of his career.
"The Naenae Express has run out of steam," he said.
"I would not mind that as a heading."
(Reporting by Greg Stutchbury; Editing by Peter Rutherford)
