This was announced in a statement released through his lawyer.
Ballack had been without a team after his two-year contract at Bayer Leverkusen expired in June.
Having played for Kaiserslautern, Leverkusen and Bayern Munich in the Bundesliga, Ballack spent four years at Stamford Bridge with Chelsea between 2006 and 2010.
He was part of the Blues team which lost the 2008 Champions League final to Manchester United in Moscow before captaining Germany to the Euro 2008 final where they suffered a 1-0 defeat to Spain in Vienna.
Ballack made the last of his 98 appearances for Germany when he captained the team during their friendly defeat against Argentina in March 2010 having made his national debut back in April 1999 against Scotland.
An ankle injury he suffered playing for Chelsea in the FA Cup final in May 2010 ruled Ballack out of the last World Cup in South Africa when he lost the captaincy of the national team to Bayern Munich's Philipp Lahm.
"At the age of 36, I can look back on a long and wonderful time in
professional football," he said.
"As a child, I could never have even dreamt of having such a career.
"It was a privilege working with first-class coaches and fantastic team-mates.
Of course I am going to miss running out in front of 80,000 spectators or
scoring goals."
"The last few months without playing football have shown me that the time had come to give it up.
"I am now looking forward to the next chapter in my life and would like to
thank my family and all the amazing people who have supported me, pushed me and accompanied me," he added.
"They have made a major contribution to my success."
Ballack's spell in English football began when he arrived at Stamford Bridge on a free transfer from Bayern shortly before the 2006 World Cup took place in his home country.
The midfielder won one Premier League title, three FA Cups and a League Cup in more than 150 Chelsea appearances, but was also part of the team that lost the champions League final to Manchester United on penalties.
He had been even more successful in Munich, winning three Bundesliga titles and three DFB-Pokals, but first lifted the Bundesliga with Kaiserslautern, who took the crown in their first season after promotion.
Ballack spent the final two seasons of his career with Leverkusen, making what turned out to be his last appearance as a professioanl footballer in a 4-1 win over Nurnberg on May 5. He was given a standing ovation when substituted after 51 minutes.
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