The injury kept the Roma defender off the field for a year and a half.
"It was a difficult decision to take but I can't continue playing if I'm not at 100 percent," said the 33-year-old.
Blazaretti, who played 16 times for Italy, including at Euro 2012, will join Roma's coaching staff.
Having recovered from his injury, he managed to play Roma's final match last season, enjoying 90 minutes against his former club Palermo.
"Having been able to play those last 90 minutes with Roma was a dream for me and I thank them for everything they allowed me to do," said Balzaretti.
He began his career with home-town club Torino before also going on to play for Juventus and Fiorentina before making his mark at Palermo.
He won Serie B with Juventus in 2007 but had several near-misses with Roma, finishing runners-up in the league the last two seasons and also finishing as losing finalists in the Italian Cup in 2013.
But it was his form for Palermo from 2008-2012 that caught the eye of the national selectors and allowed him to establish himself, briefly, as an Italy regular.