O'Neal had sent out a brief message announcing his decision on his Twitter account Wednesday, but to make things official he put on a large function with several invited guests at his home in Windermere, Fla.
"Father Time has finally caught up with Shaquille O'Neal," he said.
O'Neal, 39, played 19 seasons in the NBA. He ranks fifth all-time in points (28,596) and was part of four league championship teams. He won two scoring titles and one league MVP award.
O'Neal played only 37 games with Boston this season due to injuries and appeared for just 12 minutes in two playoff games.
He delivered a lengthy speech during which he thanked all six teams he played for, along with his teammates and fans. He had particular praise for coaches Phil Jackson, Doc Rivers and Dale Brown.
"He gave me the best three years of my life," O'Neal said of Brown, who coached O'Neal at LSU and was in attendance Friday.
"I'm going to miss the competition, the camaraderie, the friendship, the fans, joking with the media," O'Neal said. "And I'm really going to miss the free throws."
O'Neal shot 52.7 percent from the foul line during his career.
Swim Week Miami Beach 2014 [PHOTOS]