The 29-year-old has been struggling with the problem for the past 12 months and specialists have now advised him to bring his playing days to an end.
Mauger started the first and second Tests when the All Blacks beat the Lions in Christchurch and Wellington five years ago.
He moved to England with Leicester Tigers following the 2007 World Cup but had hoped to return home for a crack at the 2011 tournament at the end of the current season.
"I am gutted to be finishing my playing career many years before I had planned," said Mauger.
"After many different specialist treatments in the UK and Germany, along with an intense rehab plan with the club medical staff at Leicester Tigers, I have been unable to regain full fitness and participate in full team training and games without re-injuring myself.
"So unfortunately retiring now seems the last but only realistic option available.
"This scenario also means I will have to let go of my aspirations of returning to play in New Zealand and my desire to compete for an All Black jersey again.
"I can now only wish every team that I have played for over my career all the best and thank all of the players and coaches over the years who have helped me to achieve and to enjoy the game as much as I have."
Mauger will return to New Zealand as planned this summer and, despite now being unable to take up a playing contract with a Super 15 franchise, he still intends to stay involved in the game.
Whether that is through coaching, management or any other areas remains to be seen but Mauger's knowledge of the game is likely to ensure that there will be plenty of offers coming his way.
"I have many special memories and they are ones that I will cherish forever," added Mauger.
"The game has given me so much and I am very grateful to rugby for the opportunities and the experiences it has provided for me to learn and grow.
"I plan to stay involved in the game and look forward to some new challenges that a different role might provide for me."