The 34-year-old striker, most recently with Sky Bet League 2 side Oxford United, informed his manager Michael Appleton of his decision last week.
Kitson enjoyed a 13-year career, starting out at Cambridge United and going on to play in the Premier League with Reading and Stoke City, before spells with Portsmouth, Sheffield United and most recently Oxford.
Last season he made 30 starts for United, scoring four goals.
Stoke paid £5.5m for him in July 2008 and Kitson won the Championship title with Reading in 2006.
“I worked with Dave at Portsmouth so I have known him for a while,” said Oxford manager Michael Appleton.
“He is a very honest man who I have a lot of respect for. He came to me on Friday and told me that he would like to retire.
“I asked him to take the weekend to think it over. It is a massive decision for any player to have to take and I felt he deserved a little time to weigh it all up.
"He came back to us over the weekend and told us that his mind was made up, and so we respect that decision and wish Dave all the best for the future.”
Kitson's agent, Tim Webb, confirmed the 34-year-old will now focus on his business interests as well as consider a role to stay in football in some capacity.
"Dave will pursue his other business interests whilst remaining open to non playing opportunities within the industry," said Webb.