Wilkinson, whose drop-goal secured victory against Australia in the final of the 2003 World Cup, won 91 caps for his country as well as six Test appearances for the British and Irish Lions.
The Rugby Football Union confirmed the 32-year-old had announced his retirement and, in a statement on his own website, www.jonnywilkinson.com, he wrote: "I would like to take this opportunity to announce my retirement from international rugby.
"To do so fills me with great sadness, but I know I have been blessed in so many ways to have experienced what I have with the England rugby team."
Wilkinson retires in second on the all-time Test scoring lists with 1,246 points - 1,179 of those for England - placing him just behind New Zealand's Dan Carter.
His record for his country includes six tries, 162 conversions, 239 penalties and a record 36 drop goals.
His statement continued: "To say I have played through four World Cups, two Lions tours, 91 international games and a ridiculous number of injuries and other set backs gives me an incredibly special feeling of fulfilment. But by now I know myself well enough to know that I will never truly be satisfied!
"It goes without saying that I would like to wish Stuart Lancaster, his coaches and the England Squad every bit of success available to them. I would also very much like to extend those wishes to Martin Johnson, Brian Smith, Mike Ford, John Wells, Graham Rowntree and the rest of the England 2011 World cup management team who have been fantastic and deserve people to know that.
"For me now, I will continue to focus ever harder on my goal of being the very best I can be with Toulon Rugby Club and continue to embrace and enjoy wherever that path takes me."
Lancaster, who was appointed last week as England's interim head coach for the RBS 6 Nations Championship that starts in February, paid a glowing tribute to Wilkinson.
"Jonny has had a fantastic international career which has spanned four World Cups and 91 caps, and ranks as one of England's greatest ever players," Lancaster said.
"He will, of course, be remembered for that drop-goal. But he is more than that, a model sportsman - down to earth and hard-working - who has never stopped trying to be the best that he can.
"Everyone who has played with, coached and watched Jonny play should feel privileged to have had an involvement with him.
"Not only has he been a world-class player, but he has inspired thousands to play and watch the game of rugby.
"He will continue to do great things with Toulon, and I would like to go and see him in France to learn from his vast knowledge and experience of 13 years at the very top of the international game."
Lewis Moody, who played alongside Wilkinson in the 2003 World Cup-winning team and only announced his own retirement from the sport in October, said: "I'm humbled to have played alongside him.
"I'm saddened but his contribution over the years, his work ethic, professionalism and commitment, has been immense.
"He put everything into what he did. It was incredible to watch him train and perform.
"The fact he missed four years of international rugby but still amassed 97 caps is unimaginable.
"It's a real shame he's decided to retire but what he's given to the sport, and a generation, is immense.
Moody told Sky Sports News he believes the Toulon player could have continued at the top level - but understands why he has made the decision.
He said: "If he puts his mind to it he could keep doing it - and I think he could have given more.
"But for him the decision is right and considering the amount of work he's put in and the number of injuries he's had in his career, he deserves to enjoy a long and restful retirement."
As for England's future without Wilkinson, Moody added: "The next four years will be very interesting.
"We've got a great group of players and talent coming through and with a new coach in place it will be interesting to see how they take it forward."
Former England team-mate Ugo Monye hailed Wilkinson as "a total legend, on and off the pitch".
"He's an unbelievable ambassador, he's a guy who I thought was never going to retire," Monye told Sky Sports News. "He's the most professional sportsman I've ever worked with.
"It's the mindset. I went to school with Johnny. The way he trained then as a 16-year-old is just how he trains now."
Monye added: "You probably wouldn't' find a prouder Englishman, he absolutely loved playing for his country. For him to hang up his boots and watch from a distance is obviously going to be frustrating.
"The class of 2003 was pretty special, but he's one of the best names up there.
"He's a total legend on and off the pitch, always got time for everyone. He'll be remembered for a lot of good reasons."
Damian Hopley, chief executive officer of the Rugby Players' Association, said: "Jonny redefined the standards for rugby players in his extraordinary international playing career.
"He has been one of the consistently outstanding world class athletes of his generation and you could not wish to meet a better role model.
"His capacity for hard work, continual improvement and dedication has left a lasting legacy by which future players will be judged.
"On behalf of every RPA member, I would like to thank Jonny for everything he has done for rugby in England and we all wish him continued success for the remainder of his playing days in Toulon."
Sir Clive Woodward, who led Wilkinson and England to World Cup glory in 2003, added: "He was a marvellous team man.
"He set out to be the number one player in the world in his position but behind that his team ethic was fantastic and he was a real role model for that.
"He just put everything into his game in terms of off the field - he left nothing to chance.
"I admired how he went about his business and how much work he did when no-one was around. He did a lot on his own, studied and learned the game.
"It's a lesson to any young person about what has to happen. He took his game to a whole new level."
Asked to recall the 2003 World Cup triumph by Sky Sports News, Woodward added: "We had great indidivuals, some of the world's best players, in that team and Jonny was right up there in the world.
"He was the number one player in the world at that time, no coach would not have wanted him in their team.
"But he was a great team player and wouldn't do anything to sarcifice anything for the team. That's where you trusted him totally."
Kyran Bracken, another of Wilkinson's former international team-mates, was first to suggest that the decision may not be a permanent one.
While accepting that Lancaster may initially wish to look at younger talent, Bracken believes Wilkinson may yet play for his country again.
"I believe he has many years left if he wanted to," he told BBC Radio Five Live.
"I imagine the new regime might want to do without him for a while...but I think he has three or four years ahead of him, enjoying himself in France.
"I wouldn't be surprised if, come the next World Cup, a phone call comes in for him. I wouldn't be surprised if Jonny Wilkinson put on an England shirt again."