The 29-year-old sustained the injury during November's match against Exeter Chiefs and has had a number of complications in his attempted recovery, including suffering a re-rupture which has led to seven operations.
With the possibility of more surgery to come, the former Cardiff, Sale and Wales Under-21 player has had to retire on medical advice.
Thomas, who joined Wasps last summer from Lyon, said: "The decision becomes a lot easier once it is taken out of your hands but it is still very difficult to accept. I am hugely disappointed to not be able to play a part in the ongoing development at London Wasps."
Wasps director of rugby Dai Young said: "It's always very sad to see a player retire, especially when like Lee, they have plenty of years of playing ahead of them.
"t's a real shame because when he suffered the injury he was really beginning to settle into the club and starting to play some great rugby. Lee's a good man and we will help him out in any way we can in the future."
- Sports & Recreation
- London Wasps
- Exeter Chiefs