The three-time FA Cup winner was released by boyhood club Southampton at the end of his contract in June, having been unable to help keep the Saints afloat in the top flight.
Following his second departure from St Mary's, Walcott began training with League One side Reading, who are now coached by former Southampton manager Ruben Selles.
Selles opened the door for Walcott to join the club in a playing capacity, and the ex-Arsenal and Everton man confirmed that he has received offers to continue his career, but he feels now is the right time to call it quits.
"The first moment I put my football boots on aged 10 was the start of a special moment for me. From playing in the park with friends to performing in the biggest stadium sin front of huge crowds across the world," Walcott said in a video on social media.
"I shared the football pitch with so many incredible players and we have created so many unforgettable memories. I'd like to say a big thank you to all the managers and coaches I've worked with, especially Harry [Redknapp] for giving me a start and Arsene [Wenger] for showing belief and support to me when I joined the club at only 16 years old.
"Over 18 fantastic years in the Premier League, there are so many moments I'll cherish. The early days at Southampton, my transfer to Arsenal where I spent 12 enjoyable years and scored over 100 goals. Winning the FA Cup and scoring in the final which is every kid's dream.
"To have the opportunity to represent England 47 times, going to the World Cup in 2006 aged just 17, and still to hold the record for the youngest ever debut by a senior England player and youngest hat-trick goalscorer at 19, I'll never forget that feeling.
"Goodison Park is such a special place to play, and Everton will always be in my heart. I loved my time there and will never forget the way the fan welcomed me and my family.
"Finally back to Southampton to complete the circle. It's a great club with an exciting young team that I know will get better and better.
"I'm lucky to have had offers to continue playing, but it feels right to finish where I started and hang up my football boots. Thank you to everyone who has been with me along the way."
A product of the Southampton academy, Walcott made his first-team debut for the Saints aged just 16 years and 143 days in 2005, and he remains the youngest-ever player to feature for the first team.
Walcott was the subject of a £9m move to Arsenal in 2006, where he registered 108 goals and 80 assists in 397 matches, winning three FA Cups and two Community Shields during a successful 12-year stay, although his time was also blighted by injuries.
A brief stint at Everton followed, where the Englishman netted 11 times in 82 matches between 2018 and 2020, before he was loaned back out to boyhood club Southampton and made his return permanent in 2021.
Walcott struck another eight goals for the Saints over the past three seasons, and his final goal for the club appropriately came against Arsenal in a 3-3 draw on April 21, his 80th goal in the Premier League.
The 47-cap England international was memorably included in Sven Goran Eriksson's 2006 World Cup squad at the tender age of 17, two years before becoming the youngest Three Lions player to score a hat-trick in a 4-1 World Cup qualifying win over Croatia.