Kennedy, who has endured an injury-plagued past few seasons, cited the increasing toll on his body as the determining factor in calling time on a career that has featured stints in the National Soccer League (NSL), Bundesliga, J.League and A-League.
He scored 17 times in 36 matches for Australia including netting the winning goal against Iraq in June 2013 - having been brought on for the ineffective Tim Cahill - which sealed qualification for the 2014 FIFA World Cup in Brazil.
A snapshot of Kennedy's Socceroos contribution:
"I would like to thank Melbourne City for giving me the opportunity to come back and play in the A-League and their support over the last 6 months," Kennedy said.
"Unfortunately the demands of professional football over the years has taken its toll on me physically and after consultation with family and friends, I've made the decision to step away from playing,
"I am extremely proud of my achievements throughout my career and grateful to have represented the Socceroos at the highest level. I would like to thank the people that have helped me achieve my goals along the way, especially my family and close friends."
After enjoying arguably his most fruitfull club football stint in Japan, where he scored 63 goals from 128 matches for Nagoya Grampus, Kennedy returned to Australia in January and City scoring one goal from his six games for the club.
"We speak for the entire football community in Australia when we thank Josh for his immense contribution to the sport," City coach John van't Schip said.
"While he only spent one season with Melbourne City, Josh was critical in helping the Club achieve its highest ever finish and winning its first ever final, with a goal and wonderful performance against Wellington in last season's Final Series.
"From everyone at Melbourne City FC we wish Josh all the best for his life after football."
The imposing striker will finish his career with a J.League Championship, two J.League Golden Boots, a DFB Pokal Cup and 17 international goals for the Socceroos across three World Cup campaigns.
