The 41-year-old, who is now back-up keeper to Petr Cech at Stamford Bridge following his move from Fulham during the summer, had been expected to feature for the Socceroos at next year's World Cup.
However, he has informed Football Federation Australia that he is quitting with immediate effect following 109 appearances for his country.
Schwarzer's decision to call it a day with Australia came just hours before new coach Ange Postecoglou unveiled his first squad since taking over from the sacked Holger Osieck, and it initially included the keeper.
"Mark has been a tremendous servant for the national team," said Postecoglou.
"He is our most capped Socceroo, has been one of our best performers over a long period of time and he has always remained passionate about playing for Australia.
"I know the Australian football community will join me in paying tribute to Mark for everything he's done for the Socceroos."
Australia midfielder Tim Cahill said he was shocked at Schwarzer's decision.
"It's incredible. I feel it's a massive surprise from someone that I've looked up to my whole career," said the former Everton star.
"He's one of the greatest ambassadors to ever play the game, but most importantly a true gentlemen on and off the park."