The 30-year-old has been having ongoing knee problems for the past few years and made the decision following Glasgow Warriors' 17-15 defeat to Leinster in the RaboDirect PRO12 play-off in Dublin.
Morrison has made 176 appearances for the Warriors since joining the club in 2003 from Glasgow Hawks and has scored 110 points during his ten-year spell.
He has 35 caps for Scotland, since he made his debut for the national side in 2004.
Graeme Morrison said: "I'm sad to be leaving the Warriors but I've made the decision after receiving medical advice.
"My knee has been causing me problems for some time now and after serious consideration following the play-off, I've decided it's the right time for me to stop playing professional rugby as I am not able to continue playing at that level.
"I've had an amazing ten years in Glasgow and I've really enjoyed working with all the players and coaches. It's very exciting to see so many talented guys coming through and there is no doubt the club has a very bright future.
"Having spent my whole professional career at Glasgow, the club will always mean a lot to me. I'll continue to support the team and I hope to be back at Scotstoun for a few games next season to cheer on the boys.
"I'm very proud and privileged to have represented my country. Ever since I can remember I always dreamed of playing for Scotland. There have been many amazing experiences over the years and some great memories that will stay with me for the rest of my life, such as gaining my first cap and also the series win over in Argentina. Whilst I am sad to have stopped playing, I am very fortunate to have had these experiences.
"I'd still like to be involved with rugby in some capacity and I will be going out to Hong Kong with London Scottish later this month to do some ambassadorial work for Scottish Rugby during the week of the first Lions game."
Glasgow Warriors head coach, Gregor Townsend said: "Graeme has been a fantastic servant for the club and has been extremely loyal by staying here for his whole professional career.
"He is a true professional and will be missed by everyone at the club. We wish him all the best with whatever career path he chooses and he will always be welcome at Scotstoun."
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