The 35-year-old, who has made more than 700 senior appearances for the Reds since his debut in January 1997, has decided to call time on his career and end speculation surrounding his future.
Carragher said in a statement: "This will be my last season at Liverpool and my last as a professional footballer.
"I'm making this announcement now because I don't want the manager or the club to be answering questions on my future when I've already decided what I am going to do."
The former England international, who has won several major honours during his time at Anfield, including the Champions League, FA Cup and UEFA Super Cup, is second only behind Ian Callaghan in the club's all-time appearance table.
Carragher confirmed he will continue until the end of the season and make no further comment on his future until then.
He said: "I will be fully committed between now and the end of the season to doing the very best for Liverpool Football Club, as I've done my entire career since joining aged just nine-years-old.
"It has been a privilege and an honour to represent this great club for as long as I have and I am immensely proud to have done so and thankful for all the support I have had.
"There are many memories I want to share and people to thank, but now is not the time for that.
"I won't be making any further comment on this decision until the end of the season. All our focus and concentration should be on achieving the best possible finish in the league this season and trying to win the last remaining trophy we are competing in."
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