The 43-year old goalkeeper became the oldest player in MLS history by taking to the pitch this season but with DC United getting their keepers back from injury, his playing services will no longer be required.
Onstad retired from the Dynamo at the end of the 2010 season before taking up a coaching role with DC, who then needed him to fill in for three matches.
But now he is ready to hang up the gloves again and he is looking forward to doing it when DC meet the Dynamo at Robertson Stadium on Saturday.
"I've enjoyed it but I feel like it's time," he told the Washington Post.
"I had a taste but I'm just disappointed I couldn't do more, make a few more big saves and perform at the level I've shown in the past.
"Is the door closing? Yeah. And I haven't done myself any favors. The whole idea was to protect Bill (Hamid) as long as we could, and he is definitely ready to go."
"(Returning to Houston) is going to bring mixed emotions," Onstad added. "I spent some great times with a lot of those guys on the other side."