The 34-year-old prop has not featured for Toulon since a 33-20 win over Biarritz in February, when he aggravated the long-standing problem.
Sheridan underwent surgery in an attempt to correct the problem, but the procedure failed to have the desired effect and the former Sale Sharks man has been advised to retire.
"Andrew, 34, has failed to recover from the neck injury he sustained last season playing for Toulon and the subsequent operation he underwent, back in February," a statement from Sheridan's management company read.
"Capped 40 times by England and twice by the British and Irish Lions, Andrew will now focus on completing his qualifications in wine, before looking to forge a new career in the trade."
Sheridan won the 2006 Premiership title while at Sale, before lifting the Heineken Cup with Toulon in 2013.
England fans will have fond memories of the prop's performance against Australia in the World Cup quarter-final in 2007, when he destroyed the opposition in the scrum, before England ended up losing in the final to South Africa.