The 37-year-old currently plays for Vissel Kobe in Japan alongside fellow FIFA World Cup winners Andres Iniesta and Lukas Podolski.
Villa will head to the United States of America, where he will be a leading investor for second tier side Queensboro FC.
Villa is Spain’s all-time leading goalscorer with 59 goals from 98 games and helped his country to win EURO 2008 and the 2010 FIFA World Cup in South Africa.
He played for clubs in Spain including Sporting Gijon, Real Zaragoza, Valencia, Barcelona and Atletico Madrid.
Villa’s impressive achievements include league titles with Barcelona and Atletico Madrid as well as the UEFA Champions League with the Blaugrana in 2011, where he scored in a 3-1 over Manchester United in the final.
The EURO 2008 golden boot winner said in a statement on social media: "After 19 years as a professional, I have decided to retire from playing football at the end of this season.
"Thank you to all the teams, coaches and team-mates that have allowed me to enjoy this dream career.
"Thank you to my family, that has always been there to support me through good and hard times. It is my objective to put the cherry on top by winning the Emperor's Cup with Vissel Kobe on January 1st.
"From then on, I will continue to enjoy football through all the projects that we're currently developing with DV7 group. Thank you for all the love."
