The Dutchman has enjoyed a distinguished career which has seen him secure major honours with PSV Eindhoven, Milan and The Red Devils.
Stam had hoped to play out his final season with Ajax before calling time on his career, but a recurrence of a knee injury forced him to announce his retirement on Monday.
Stam's career highlight was helping United to secure the Treble of Premier League, FA Cup and Champions League in 1999.
The 35-year-old revealed that he had taken the decision to quit due to a lack of motivation.
"This decision was not taken overnight," said Stam.
"A while ago, I told [technical director] Martin van Geel and [managing director] Maarten Fontein that I could no longer motivate myself enough. Physically, I was no longer 100%.
"During matches, I was more busy with myself than with the opponent. That's not right. Especially for someone who relies on his strength.
"I want to give myself for the full 100% and not 60% or 70%."