The 37-year-old Smith, who was signed by the expansion franchise in 1995, is seventh on the NFL's all-time list with 862 career receptions.
His 12,287 reception yards are good for 11th all-time.
"This is a day I've been trying to get to my whole career," Smith said at a news conference. "I reached my goal to have played in a long and illustrious career in the NFL."
"It is a sad day in one respect," said team owner Wayne Weaver. "This is kind of an end of an era in Jaguars' history and I can tell you it was a great era."
In 2005, Smith made 70 catches for 1,023 yards and six touchdowns in 16 games.
He appeared in five consecutive Pro Bowls from 1997-2001, and led Jacksonville to its second appearance in the AFC title game in 1999.