The former Spain striker, 38, joined the Cosmos of the North American Soccer League, a level below Major League Soccer, in December but has decided to call it a day after a single campaign.
"When I signed for the New York Cosmos in December, I said I would evaluate how I felt towards the end of the year and assess whether I would continue to play," he said.
"My decision is to retire from playing at the end of this season. I am fully focused on finishing the season strong and helping the New York Cosmos win the NASL Championship. In the coming months I will decide the next step in my career.
"Playing soccer has been part of my life for so long and the decision to retire is not an easy one but I believe it is the right time.
"I'm thankful to everyone who has supported me throughout my career and I look forward to playing my final games with the New York Cosmos over the coming weeks."
Soccer legend Raúl will retire at the end of this @naslofficial season. Story ➡️
http://t.co/r5CzDefRl3 #NYCosmos pic.twitter.com/ykiqAPXH5b
— New York Cosmos (@NYCosmos) 15. Oktober 2015
Raul enjoyed a glittering career in his homeland, spending 16 years with Real Madrid during which time he won six La Liga titles, three Champions League titles and six Spanish Super Cups, before later spells with Schalke and Al-Sadd Sports Club. He also scored 44 goals in 102 appearances for Spain.
Cosmos head coach Giovanni Savarese said: "Raul is one of the world's most iconic players. I knew when we signed him what he would bring on pitch but his knowledge, passion, professionalism and commitment has exceeded my expectations.
"In less than a year, Raul has become a big part of the team and he will always remain part of the Cosmos family."
The Cosmos have already punched their ticket to the NASL post-season by finishing top of the standings in the spring season. They sit third in the fall season standings and top in the combined standings.