The 34-year-old, who is a former England international, suffered the strain in the early part of the season, but has failed to recover.
"Unfortunately, following the injury to my knee earlier this season it has not been possible for me to return to full fitness despite the best efforts of myself and the Warriors' medical team," Perry said in a statement.
"Specialist opinion is that I cannot continue a career in professional rugby. It is extremely hard to accept the decision that I must retire because, having started playing at the age of seven, rugby has always been a big part of my life. I very much hope to continue to be involved in rugby in some capacity."
Perry won 14 caps for his country.