Kuechly, 28, announced the surprising news in a video posted Tuesday night on the Panthers' official Twitter account.
"It's never the right time to step away, but now is the right time for me," Kuechly said. "It's a tough decision. I've thought about it a lot and now is the right chance for me to move on.
"It makes me sad because I love playing this game. I've been playing it since I was a little kid and it's my favorite thing in the world to do. The memories I have from this place and this organization and playing on the field with these guys will never go away."
Kuechly, a five-time first-team All-Pro, said he still wants to play but doesn't believe it's the "right decision." He has missed only one game in the last three seasons but has suffered multiple documented concussions in his NFL career.
"There's only one way to play this game since I was a little kid," Kuechly said. "It's to play fast, play physical and play strong. And at this point, I don't know if I am able to do that anymore and that's the part that's the most difficult. I still want to play, but I don't think it's the right decision."
Kuechly, the No. 9 overall pick in the 2012 NFL Draft out of Boston College, was the league's Rookie of the Year in 2012 and its Defensive Player of the Year in 2013. In 118 career games, he recorded 1,092 total tackles, 12.5 sacks, 18 interceptions, 67 passes defensed, seven forced fumbles, one safety and one defensive touchdown.
Kuechly had two years remaining on his contract with the Panthers. He is walking away from $10.8 million in the 2020 season.