The two-time Rugby World Cup winning captain made the announcement in Auckland on Thursday, bringing an end to a 148 Test cap career.
McCaw only lost 15 games as an All Black and played 111 as captain.
The Cantabrian captained New Zealand to three World Cups, retaining his spot after the quarter-final disappointment of 2007 to claim an unprecedented two Webb Ellis trophies in a row in 2011 and 2015.
His effort in the 2011 final against France when he played with a broken bone in his foot is the stuff of legend.
With a mortgage on the Bledisloe Cup for the last 13-years, four Super Rugby titles with the Crusaders, seven Tri Nations/Rugby Championship trophies and 27-tries to his name, McCaw goes out as one of the greatest players to ever step foot on a rugby field.
McCaw made the announcement alongside All Blacks coach Steve Hansen and NZRU Steve Tew.
Ahead of the announcement, gathered media were asked to stand for a moment's silence to remember Jonah Lomu before McCaw spoke from the heart about New Zealand's greatest winger.
It's a measure of the man that McCaw reflected on Lomu and sent his condolences to the big man's family before announcing his retirement.
After breaking the news, McCaw revealed he would throw himself into a new helicopter business in Christchurch as well as "a few sponsor commitments."
The normally stoic McCaw was unemotional during the announcement but nearly cracked when Hansen and Tew played a video of past players and opponents paying tribute to the game's most capped player.
"It probably hasn't sunk in yet," he said.
"Having that video and those guys say that was pretty cool but I don't think it will sink in until i see the guys running out next time around.
"The one time it really did hit home was in the sheds after the (RWC) final when I took off the jersey and realised it would be for the last time.
"I didn't want to take it off. But deep down you know it's the right time."