The 41-year-old keeper, who also plays for London club Chelsea, revealed the decision just hours after Ange Postecoglou unveiled his first squad since taking over from former manager Holger Osieck, with Schwarzer in the frame to start.
"Mark has been a tremendous servant for the national team," said Postecoglou, according to Sky Sports News.
"He is our most capped Socceroo, has been one of our best performers over a long period of time and he has always remained passionate about playing for Australia.
"I know the Australian football community will join me in paying tribute to Mark for everything he's done for the Socceroos."
Schwarzer joined Premier League club Chelsea from London rivals Fulham in the summer.