Holmstrom, whose 40th birthday is Wednesday, won four Stanley Cups with the Red Wings in a career that started in the 1996-97 season.
"After 15 seasons, four Stanley Cups, and an Olympic championship, it is time for me to retire," he said. "It wasn't the easiest decision to make, but it was the right one. I had a great job."
The Sweden native compiled 243 goals and 530 points in regular-season play, as well as 46 goals and 97 points in 180 post-season appearances.
"Tomas Holmstrom was a fierce competitor who played hard every shift of every game," Detroit General Manager Ken Holland said. "He provided us with an abrasive style that complemented our skill players so well."
His 1,026 games played is sixth on the all-time list for the Red Wings.
Holmstrom notched 11 goals and 24 points in 74 games last season, below his career averages of 16 goals and 33 points a season.