The Bulgarian is in remission from a disease which was diagnosed in March 2012 after he complained of feeling fatigued during a game at Arsenal.
'Soft treatment' remains ongoing and Petrov, who spent seven years at Celtic before joining Villa in 2006, has decided to devote himself to charity work rather than return to football.
In a statement released on the Villa website he said: "It is with a heavy heart that I am announcing my retirement from the game.
"The emotions are overwhelming really, but the continued support of family, friends and the great people I have come to know will make it easier for me to move on from the only life I've ever known.
"That I am ready to embrace new challenges will make this process much easier.
"Since being diagnosed with acute leukaemia in March 2012, I have come to understand and appreciate the way in which this disease impacts the lives of so many people.
"I can help and I want to help and, in setting up a foundation to help address the issues involved when people are diagnosed with this illness, I hope to make a difference.
"For the life I've lived in football, I will always be incredibly grateful. For the opportunity this crazy thing that happened in my life has given me, I also feel grateful in a strange kind of way.
"This crazy thing, somehow, has touched people and I want to try to channel this in a positive way. This will be the greatest challenge of my life.
"I wish to thank the fans of Aston Villa and the Villa chairman, Randy Lerner, chief executive Paul Faulkner and manager Paul Lambert, also the fans of Celtic, the Bulgarian fans and fans of football all over the world who have helped me through the past year."