The midfielder injured his left knee earlier in July, while training ahead of his fourth season with the LaLiga club.
"Today is a sad day for me," Silva said in a video posted to his social media, recapping some of his career highlights.
"Today it is time to say goodbye to what I have dedicated my whole life to. Today it is time to say goodbye to my colleagues, who are like family to me. I will miss you very much."
One of his generation's finest playmakers, Silva had trophy-laden spells in the Premier League, LaLiga and the Spain national team.
He won major trophies, which include the World Cup in 2010 and the European Championship twice with Spain, while he won the Copa del Rey twice, once with Valencia in 2008 and his last trophy with Sociedad in 2020.
However, his most successful club spell came with Manchester City, where he won the Premier League four times, the FA Cup twice and five League Cups in a decade-long stay from 2010-2020.
An academy product of Valencia, Silva has more than 120 goals and almost 200 assists in nearly 750 club appearances, while netting 35 times in 125 appearances for Spain.
He was honoured with a statue outside City's Etihad Stadium in recognition of his contribution to the club's success after his departure in 2020.
