The Welsh fly-half, who won a record 104 caps for his country, will take up a coaching role with the club after he hangs up his boots.
"I feel incredibly lucky to have played for some fantastic sides down through the years," he said.
"I feel the time is right for me now to make the transition into coaching, which is what I have always wanted to do. There is an opportunity for me to do that at London Wasps and I am very excited about the next step of my career."
Former Wales captain Jones is his country's second-highest points scorer, behind Neil Jenkins, with a haul of 917.