The three-time all-star missed 66 regular-season games after surgery in November and has played sparingly in the first-round playoff series against Cleveland, which held a 3-2 advantage after losing Game 5 88-87 Wednesday.
"It's frustrating because I was willing to do anything," Arenas told The Washington Post. "I end up taking the shot, taking four different kinds of pain pills, Vicodin, I sound like a drug addict just to play in the game, and it still doesn't work. I need to rest it, go back and start rehabbing it again and get ready for next season."
WJLA-TV in Washington reported that Coach Eddie Jordan learned about Arenas' decision, announced one-hour before tipoff, through the media.
The seven-year NBA veteran will be a free agent in the off-season.
His career averages are 22.8 points, 5.5 assists and 4.2 rebounds per contest.
NBC reportedly holds celebs hostage to Jimmy Fallon's show
Ray Liotta sues skin care company over use of likeness