The 39-year-old Dane, the son of goalkeeping great Peter Schmeichel, injured his shoulder during a Europa League match for Celtic against Stuttgart in February.
The following month he underwent surgery to try to save his career, but to no avail.
“When my contract with Celtic expires in June, I will end my career as a professional footballer,” Schmeichel told Danish television channel TV2.
“It’s a decision that has been taken for me after consulting several surgeons, who are specialists with relation to my shoulder, who told me that I shouldn’t expect to come back and play at the highest level.
“It’s not fun, it’s absolutely not the way I would have wanted to end my career, but on the other hand, everything comes to an end.”
Schmeichel has enjoyed a remarkable career, representing his country 120 times — putting him fourth on the all-time appearance list for Danish internationals, nine caps and two places below his father.
After coming through the youth ranks at Manchester City, Schmeichel spent the bulk of his career at Leicester, where he was part of the team that stunned the football world by winning the Premier League in 2016.
He also won the FA Cup with Leicester five years later and after a short spell at French club Nice, he wound down his career in Scotland, winning the league in back-to-back seasons at Celtic.
His father was widely regarded as one of the greatest goalkeepers of all-time and helped Denmark win the Euros in 1992.
He also captained Manchester United to Champions League glory in 1999 and won the Premier League five times with the Red Devils.
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