The 35-year-old stated via Twitter that "the time has now come" to conclude his playing career at the end of the 2019 season.
In a message to fans, he said: "I would like to thank both you and my teams FC Bayern, Manchester United, Chicago Fire and the German national team. You made this unbelievable time possible for me!
"And of course, I would also like to thank my wife Ana Ivanovic and my family for their support.
"Saying goodbye as an active player makes me feel a little nostalgic, but I am also looking forward to the exciting challenges that await me soon.
"I will remain faithful to football. Many, many thanks for the time we spent together, I will always have a place for you in my heart!"
The Time has now come: I would like to thank both, you and my teams @FCBayern, @ManUtd, @ChicagoFire and @DFB_Team and of course @AnaIvanovic and my family for their support!— Basti Schweinsteiger (@BSchweinsteiger) October 8, 2019
Thank you! pic.twitter.com/jNSrXGNpxF
Schweinsteiger joined Fire in 2017 after leaving United and signed a one-year contract extension last January, but he could not help them finish higher than eighth in the Eastern Conference.
The midfielder progressed through Bayern Munich's youth system and went on to win 18 trophies in a 14-year career with the senior side, his crowning moment coming in the treble-winning season of 2012-13.
He moved to United in 2015 but struggled to impress in Louis van Gaal's final season in charge and was initially ostracised from the first team by Jose Mourinho when he took over.
However, he forced his way back into Mourinho's plans and scored his last goal in a 4-0 FA Cup win over Wigan Athletic in January 2017, shortly before leaving for MLS.
Schweinsteiger won 121 caps for Germany to become their fourth-highest appearance-maker, winning the World Cup in 2014 and becoming captain for two years after Philipp Lahm's retirement.