McKinley played six times for his club and was man-of-the-match in the league victory over Benetton Treviso in February.
The Dublin-born player also won nine caps with the Ireland Under-20 side, which he captained against Samoa in the U20 World Cup in 2009.
However, he sustained a serious eye injury in 2010 whilst playing for his former club UCD against Lansdowne in an All-Ireland League game.
And Schmidt said: "It is always a sad time whenever a player has to call time on his career, but it is especially difficult when a player with as bright a future in the game as Ian has to make the decision so prematurely.
"I know that Ian will be successful in whatever he decides to do over the next few years and I would like to thank him for his significant contribution to the success of the province over the course of his career."
McKinley is now making new career plans after further complications with the injury in May and is considering taking up a career as a coach.
"While I am very upset by this turn of events, now it's about planning the next stage in my life," he said.
"At this point I like the idea of maybe pursuing a career in coaching.
"I'm trying to stay positive because there are bigger issues in life that people face every day and everyone has been so incredibly supportive.
"I thoroughly enjoyed my playing career and I'm deeply appreciative of my team-mates, the coaching and support staff and all of the supporters who provided me with so many wonderful memories."
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