Nalbandian, 31 from Argentina, said a shoulder injury led to his decision to withdraw from competitive tennis.
"I can play matches but my shoulder won't let me continue my career," he said at a news conference Monday in Buenos Aires. "I can't play like that at a [professional] level.
"It's tough because I have to announce my retirement from the sport that gave me so much. I'm very grateful."
Nalbandian won 11 ATP tournaments in his career and reached a No. 3 ranking in March 2006. His most recent title came in August 2010 at the Legg Mason Tennis Classic in Washington. He's been in three finals since then, including a lose to Rafael Nadal in the title match at the Brazil Open in February.
Nalbandian helped Argentina reached the Davis Cup finals in 2004, '08 and '11 but finished as the runner-up each time.