The 30-year-old joined the Ospreys in 2005 and made 209 appearances for the club, including lifting the PRO12 title in 2012.
Capped at all age-grade levels by Wales, Bishop won his first senior cap on the South Africa tour of 2008 before going on to make 16 appearances in total.
"It's a very sad day for me personally but it is the right decision to make" said Bishop.
"All I've known for the last ten or 11 years is rugby and the Ospreys, so life will be very different for me now that I'm no longer going to be training every day and working towards match day on the weekend.
"Deep down I've known that this was coming for some time. After the second op I was told that if it happened again I would most likely need to retire. When I had my third surgery earlier this year it was kind of inevitable.
"I'm grateful to the Ospreys management for not pressuring me and giving me the time I needed to come to terms with the implications.
"I've taken a bit of time to get my head around it but I realise there's more to life than rugby. I've got a young family to look after and that will be my focus now.
"I'm incredibly fortunate to have had the career I've had, with so many special memories. I've made some great friends and I'm proud of what we have achieved at the Ospreys during my time.
"This is my region and now I'm not playing I'll be a supporter. I've got my season tickets and I'll still be a regular at the Liberty."
Bishop made nine appearances in the GUINNESS PRO12 last season although he failed to appear in 2015 due to injury.
And the Welshman had a special word of thanks for the medical staff who had supported him.
"While I owe thanks to everybody I've worked with at the Ospreys, players and coaches, a special thanks needs to go to Chris Towers and the medical team for all the support they've given me over the last few years.
"It seems they hardly ever saw me for the first eight or nine years and then they never saw the back of me, but I can't thank them enough for everything they've done to get me back up and running. It's a shame that this was one time too far."
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