The Greeks were eliminated by Costa Rica via a penalty shootout on Sunday in the last 16 of the tournament.
Karagounis is the country's record appearance holder having won 139 caps during a 15-year international career.
"This was my last game for Greece," the 37-year-old midfielder told reporters. "We wanted to stay on another week or even longer but you can't change it now.
"The national team has grown up, younger players have won invaluable experiences. This is no small thing and, as we helped the team come of age, we hope it will continue to be as successful in the future."
Karagounis was part of the Greece squad that stunned the footballing world by winning the 2004 European Championship.