An emotional Hayden revealed his decision at his home ground, the Gabba, in Brisbane.The 37-year-old was set to take a lap of honour in front of his home crowd before Tuesday evening's Twenty20 match between Australia and South Africa.
He averaged less than 20 in Australia's 2-1 test series loss to South Africa, its first home series loss in 16 years.
Having scored 8,625 runs at an average of 50.73 during his Test career, the powerful left-hander was dropped for the current Twenty20 games and one-dayers against the Proteas.
He has played in 103 Test matches during a 17-year career.
He averaged 43.8 in the format with a top score of 181 not out.
"I have loved so much playing cricket, and I count it as so much of an honour to have represented my country," Hayden said.
One of his former team-mates, the retired fast bowler Glenn McGrath, praised a "legend of the game" who, he said, had "nothing left to prove".
"It's been an absolute honour and a privilege to play with him and even more so to call him a mate," said McGrath.
"His career stands alone. He's an amazing person and an amazing player, I was just very lucky to be a part of it."
Hayden, a veteran of 103 Tests, struggled in the five-day version of the sport this summer against New Zealand and South Africa, scoring just 149 runs at 16.55 from five matches.
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