Prescott has made 145 appearances for his hometown club since joining them in 2004, but his only appearance this season was in the opening game at Salford in February.
"After consultation with some of the best surgeons in the country, it is with great sadness that I am forced to announce my retirement as a rugby league player with immediate effect," Prescott said.
"This injury has been a persistent problem since its initial diagnosis in 2008 and the constant rehabilitation, treatment and maintenance a daily battle.
"Unfortunately, after countless injections and two lots of surgery, the most recent in March of this year, the specialists have advised me that this can no longer continue.
"I leave the game with an enormous amount of pride at representing the club I (have) supported since the age of five for over 10 seasons and the invaluable memories and winners' medals from the 2010 Grand Final and 2011 Challenge Cup."
Wigan coach Shaun Wane said: "I feel hugely sorry for Paul that he has been forced to come to this decision through injury.
"Paul has been a model professional and is also a great person and he will be missed on the field by everyone who has played with or against him.
"I am certain he will go on to be a huge success in whatever he decides the future holds for him and I wish him all the very best."