The 39-year-old, who is a member of newly crowned Scottish champions Celtic, has missed large parts of the spring season due to a shoulder injury. When his contract expires in June, his career will be over.
"I have consulted several different surgeons and experts regarding my shoulder, and they have said that I should not expect to be able to return to elite football," Schmeichel said.
"I've thought a lot, but I think it's the right time."
The goalkeeper has had a long career with clubs including Manchester City, Coventry and Leeds. Schmeichel was a member of Leicester for many years and was part of the club's sensational first Premier League title in the 2015-2016 season.
He made 120 appearances for the Danish national team.
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