The 32-year-old announced his decision just hours after England had suffered defeat to India in the second Test of the five-match series at Lord's on Monday.
Prior, who has come under fire for his poor performances with the bat in recent matches, revealed he is suffering with injuries to his right quadricep and right hand and is also expecting to have surgery on a long-standing Achilles problem.
"I'm not doing justice to myself and more importantly the team and that is what matters first and foremost," read a statement from Prior on the England and Wales Cricket Board's official website.
"I tore my quad before the first Test and my right hand has been beaten to a pulp but the main issue is the Achilles.
"Now we have the time, I want to be pro-active about how we deal with it so I imagine that I'll have an operation.
"I've always said as long as I can do my job I will manage the pain and get on with it but it has now got to the point where I can't do my job to the level I expect of myself."
Prior, who is expected to be replaced in the Test line-up by Jos Butter, confessed that it was a hard decision to make and accepts he may not be able to win his place back.
"It is a huge decision and not one I've taken lightly because I could have played my last game," he added.
"Playing for England is the greatest honour you can have in the game and that is my motivation to come back and try and play again in the best possible condition.
"I've made my decision for the good of the team and whoever comes in I genuinely wish them the best of luck."