Defoe, who re-joined the Black Cats in February, scored 304 goals in 762 career club games and added 20 goals in 57 England appearances.
He also spent time at Portsmouth, Bournemouth and Major League Soccer club Toronto during his 22-year career.
"It's been a really tough decision," Defoe wrote in a statement.
"I made my professional debut at 17-years-old in 1999, and I feel now is the right time to bow out."
Diminutive forward Defoe scored 162 Premier League goals, making him the ninth highest scorer in the league since its formation in 1992-93.
He is also 15th in the appearances list, having played 496 games in England's top flight.
Defoe's Sunderland return was marked by a late night social media unveiling on January's deadline day, in which the veteran striker described the return as "special for many reasons".
However, he failed the reach the heights of his first spell, making just seven appearances - of which just two were starts - and failing to score for the League One promotion-chasers.
While a prominent international, to many non-football fans Defoe will be best known for his friendship with terminally ill Sunderland fan Bradley Lowery, who died in 2017, aged six, after a long cancer illness.
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