Wagner was picked in the squad for the two home tests against Pat Cummins's Australia but was told by head coach Gary Stead he would not play in either match.
The South Africa-born 37-year-old fought back tears at a press conference at Wellington's Basin Reserve as he confirmed his retirement from international cricket alongside Stead.
"It’s been an emotional week," said Wagner, a fiery, left-arm swing bowler and fan favourite.
"It’s not easy to step away from something you’ve given so much to and got so much out of, but it’s now time for others to step up and take this team forward.
"To the New Zealand public and the fans, I can't thank you enough, for your support, for making me feel welcome, for making me feel like a Kiwi."
Though born and raised in Pretoria, and 12th man for South Africa in two tests, Wagner migrated to New Zealand in 2008 and proved instrumental in his adopted nation's rise to the world number one ranking and their inaugural World Test Championship title in 2021.
While completing a four-year, stand-down period from international cricket to become eligible for New Zealand, Wagner became the first player to take five wickets in six balls in first-class cricket when bowling for Otago against Wellington.
He made his test debut against the West Indies in 2012 but took time to find his feet at the highest level, spending nearly a year on the outer from 2014-15.
After winning back his place, Wagner played memorable roles in several triumphs, not merely with the ball.
He helped New Zealand to their first test series win over England in nearly 20 years in the 2018 home summer, his 103-ball knock for seven runs part of an epic rearguard with Ish Sodhi that saved the second test in Christchurch.
He returned to confound England again last year, taking four fourth innings wickets to secure a one-run win in a classic Wellington test that saw the series drawn 1-1.
He retires with a bowling average of 27.57 runs and a strike rate of 52, only bettered by Richard Hadlee (50) among New Zealanders to have taken more than 100 test wickets.
Wagner will continue to play first-class cricket but said the time was right to step away from tests.
"They sometimes say when you think about retirement, you're screwed in a way," he added.
"It's never easy. It's an emotional road. It's a big rollercoaster, but it's... the time to pass that baton on and leave that Black Cap in a good place for the rest to take it and hopefully grow their legacy."
