Murphy has been working as a pundit in the media since departing Ewood Park - his contract was terminated in June with a year remaining - and he has decided to hang up his boots.
The 36-year-old also played for Crewe, Liverpool, Charlton, Tottenham and Fulham in a career spanning two decades and consisting of over 600 senior appearances and nine England caps.
"There have been some press reports about whether I'm still playing or available but I decided a little while ago I would retire, I just didn't make it official," Murphy told talkSPORT.
"So now I'm officially retiring because I'm sick of having conversations about it and almost stringing people along. I decided three or four weeks ago I was done.
"This is me, 20 years, I'm done. I've had a wonderful career and can look back on it with fondness."
Murphy won the FA Cup, two League Cups and the UEFA Cup during his time at Anfield and was a key figure when Fulham reached the Europa League final in 2010.
Cottagers boss Martin Jol reluctantly allowed Murphy to leave in 2012 with the club refusing to offer him any more than a one-year contract.