The 35-year-old right back spent 20 years at United, playing over 600 matches for the Old Trafford club and helping them win a raft of trophies including the Champions League and eight Premier League titles.
"I have been a Manchester United fan all my life and fulfilled every dream I've ever had," Neville said in a statement on the club website.
"Obviously I am disappointed that my playing days are at an end, however it comes to us all, and it's knowing when that time is and for me that time is now."
Neville broke into the United first team in 1992 and was part of a renowned group of players who came through the club's youth scheme including his younger brother Phil, Ryan Giggs, David Beckham, Paul Scholes and Nicky Butt.
They formed the basis of the team built by manager Sir Alex Ferguson which dominated English soccer in the 1990s, culminating in the treble-winning season of 1999.
Phil Neville, Beckham and Butt left United but Gary Neville, Giggs and Scholes remained and Ferguson created another team who won the Champions League again in 2008.
"Gary was the best English right-back of his generation," Ferguson said, praising his presence in the dressing room and leadership qualities.
"He is an example to any young professional, hard-working, loyal and intelligent. As a United fan born and bred, his fantastic career at Old Trafford has cemented his place in the affection of the club's supporters everywhere."
"RED NEV"
Gary Neville was a fiercely competitive and highly consistent defender who read the game well and created many goals with his ability to cross the ball accurately and with pace.
Born locally, he was known as "Red Nev" and frequently displayed his passion for his club, notably celebrating a goal against United's arch-rivals Liverpool in 2006 with a wild badge-clenching celebration which earned him a fine for improper conduct.
He was appointed United club captain in 2005 and won 85 England caps between 1995 and 2007, helping the national team reach the 1996 European Championship semi-finals.
The end of Neville's career was blighted by injuries and he struggled to cope with the pace of the Premier League in the few matches he played this season.
His final appearance was against West Bromwich Albion in January when he joined an exclusive group of players to reach 400 Premier League appearances.
"I have played in the most incredible football teams, playing with some of the best players in the world as well as against them and I have been lucky to have been part of the team's achievements and the club's great success," Neville said.
