Lee stopped playing international cricket in July 2012 but continued to play the Twenty20 form of the game in the Australian Big Bash League and the Indian Premier League.
His Sydney Sixers side have one Big Bash regular-season match remaining, against local rivals the Sydney Thunder next Thursday at the Sydney Cricket Ground ahead of a possible finals clash.
“I’m not Benjamin Button… I’m finally calling stumps on my career,” he said.
“I’m excited and emotional, certainly happy that I’ve made the right decision.
“I knew before this season it was going to be my last season and I think I’ve had more fun in the last six weeks than I have in the rest of my career.
“I didn’t bother doing the maths but 20 years is a lot of ice baths, a lot of training sessions, a lot balls bowled and a lot of flights.
“But it’s given me so many great memories.”
Lee took 310 wickets in 76 Tests for Australia and also claimed 380 dismissals in 221 one-day internationals.
His fastest delivery topped the 100mph mark and he has managed to bowl consistently fast throughout his career.
“He has been an exceptional cricketer who gained fans around the world not only for his electrifying pace and performances with the ball, but the way that he played the game,” said Cricket Australia chief James Sutherland.
“Sir Donald Bradman often said that it is a player’s responsibility to leave the game in a better state than when they first became involved. Brett Lee has certainly done that.”