Woodson, who went to the Pro Bowl eight times in his career with the Packers and the Oakland Raiders, helped the Packers beat the Pittsburgh Steelers 31-25 in Super Bowl XLV at the end of the 2010 season.
He won the Heisman Trophy in 1997 as a cornerback and punter at Michigan, where he led the Wolverines to a national championship that year and was named an all-American in 1996 and '97.
Woodson, 36, played eight years in Oakland before joining the Packers as a free-agent in 2006.
He tied for the NFL lead with nine interceptions in 2009, when he also had four forced fumbles and two sacks, and became the second Packer ever to be named NFL Defensive Player of the Year.
"We are grateful for all that Charles has given to the Green Bay Packers over the past seven years," Packers General Manager Ted Thompson said. "He has been an integral part of the Packers' success and our Super Bowl title in 2010 would not have been possible without his contributions. A once-in-a-generation talent as a player, he is also a great leader and ambassador for the organization off the field. Charles will always be a member of the Packers family and we look forward to his eventual induction into the Pro Football Hall of Fame."