He left Atletico to join Japan's Sagan Tosu in July last year but has struggled to hit the heights of his best days at Atletico and Liverpool at the J-League side.
"After 18 exciting years, the time has come to put an end to my football career," the 35-year-old wrote on Twitter, adding that he would hold a news conference in Japan on Sunday to explain his decision.
Torres made his Spain debut in 2003 and scored the winning goal in the 2008 European Championship final against Germany before helping his country win their first World Cup in 2010.
He was the top scorer at Euro 2012 as Spain successfully defended their title and scored 38 goals in 110 appearances for his country in total, making him Spain's country's third-highest goalscorer behind David Villa (59) and Raul (44).
Torres enjoyed his the most prolific spell at Liverpool between 2007 and 2011, netting 81 goals in 142 games across all competitions.
He moved to Chelsea from Liverpool for a then British record fee of 50 million pounds, and won the FA Cup, Champions League and Europa League with the London club.
(Reporting by Hardik Vyas in Bengaluru; Editing by Simon Jennings)
