The 27-year-old has undergone a number of operations since damaging his knee ligaments in January 2012 and the decision has been made for Morgan not to continue.
"It's been such a difficult decision," Morgan told Gloucester's official website. "Even though I've had a long time to consider this moment, it doesn't make it any easier.
"The frustrating element is that we've actually made so much progress with my knee. I can't speak highly enough of the work that Bob Stewart and the medical team, and also Jamie Bain, have done with my rehabilitation.
"However, I have had to reluctantly accept that, the knee would not be able to cope with the stresses of matches week in and week out, as well as regular training sessions. It would just be too much."
Morgan finishes his career having earned two caps for England.