Parcells had coached the Cowboys since 2003 and was 34-30 over his four seasons with Dallas. The Cowboys were 9-7 in the regular season but were defeated in the first round of the NFC playoffs.
It was the fourth NFL team Parcells had led.
"I am retiring from coaching football," Parcells said in a statement released by the Cowboys. He thanked the Cowboys' front office, coaching staff and players.
"I am in good health and feel lucky to have been able to coach in the NFL for an extended period of time. I leave the game and the NFL with nothing but good feelings and gratitude to all the players, coaches and other people that have assisted me in that regard," Parcells said.
He has an overall head coaching mark of 172-130-1 in the regular season with the Cowboys, New York Jets, New England Patriots and New York Giants, winning two Super Bowl titles during an eight-year run with the Giants.