The 34-year-old flanker ended his career as the most capped player (148) and captain (110) in world rugby. He won three World Rugby Player of the Year awards and led the All Blacks to successive World Cup victories in 2011 and 2015.
His decision came the day after the unexpected death of Jonah Lomu at the age of 40 had rocked the rugby-mad country.
McCaw paid tribute to the former All Blacks winger before confirming his widely expected decision.
"I'm going to be hanging up my boots. My last game for the All Blacks and as a professional rugby player was the World Cup final a couple of weeks ago," McCaw told a news conference on Thursday.
