Hunter became the most capped woman in test rugby history last year after making her 138th international appearance in the women's Rugby World Cup in New Zealand. With 140 caps for England, she is the country's most capped player, male or female.
Since making her England debut in 2007, Hunter has won one World Cup title in 2014 and led her team to finals in 2017 and 2022, while also winning 10 Six Nations titles.
"Not many athletes get to choose how and when they call time on their playing careers. I am very fortunate that I have the opportunity to finish on my own terms," Hunter said in a statement.
"I couldn't think of a better way to do it than in my home town where my rugby journey started.
"I get to finish in a place that has a special place in my heart in front of my friends, family and Red Roses' supporters and I feel very fortunate that I'm able to do that."
She was part of the England team that went on a record 30-match winning streak between 2019-2022, which was ended by defeat to New Zealand in the World Cup final in November.
"Sarah is the most honest and professional player I have ever known, let alone worked with," England women's head coach Simon Middleton said.
"Throughout her career, her commitment to being the best version of herself at every opportunity has shone through in her attention to detail and faultless preparation.
"She's an absolute inspiration for everybody who has played with her or worked with her and is the ultimate example to every young person who would want to play."
Hunter was named the British Rugby Union Writers' Club's Personality of the Year for 2022 in January, becoming the third woman to win the award after Maggie Alphonsi and Emily Scarratt.
