As a result, the former Aston Villa midfielder will not feature at this summer's World Cup in Brazil.
However, the 30-year-old, who scored twice in South Africa four years ago, has insisted that it is the right time for him to withdraw his services.
"It has been a great honour and privilege to play for Australia, and to represent one's country is every footballer's dream," he said in a statement. "I am proud of my achievements and I take with me many happy memories of my time with the national team. Growing up in Croydon Park, I would never have imagined scoring twice in a World Cup.
"Over the past six months, circumstances have led me to rethink my international career and I have made the difficult decision to step aside from my role with the Socceroos. My priorities lie with my young family, and my focus from now on will be with my club Al Nasr."
Holman made 63 appearances for the Socceroos, scoring nine goals in the process.