The 41 year-old said: "I've been saying it for a while now, but this time I really think the moment has come to stop playing football.
"I will remain in this sport in another capacity, but at this moment I am not sure whether I want to be behind the scenes or a Coach."
Milan are struggling to construct a solid defence, but the captain thinks they already have his heir.
"In the future Thiago Silva will do a great job, but I still say that Milan must focus on Alessandro Nesta for the present and immediate future.
"I think he will be back stronger than ever. I spoke to him recently and he was fired up, enthusiastic and at last relieved his back problems are improving.
"Clearly if he returns, which I'm sure he will, then it is to play at the highest level. I'm betting on Nesta to take on my mantle. He is a real champion and the best centre-back around."