Moody, who retired from international rugby after captaining England at the 2011 World Cup, underwent surgery in December and had hoped to return to action before the end of the season.
"Totally gutted I have had to take the decision to retire from all forms of rugby. I will truly miss it," said Moody.
"I owe a huge debt of gratitude to all the medics and physios who have put me back together time and time again to enable me to continue to play this wonderful sport of ours.
"I would like to thank all of the coaches that I have worked with during my career, from Bracknell minis to the British & Irish Lions; they have all left their mark on me as a player.
"It goes without saying how much I value the fans who have supported me so loyally over the years, it has been one of life's singular pleasures to have played this game in front of you.
"Finally, I would not have achieved what I have in this sport without the continued support of my family and friends during my entire career.
"Rugby has been my life for such a long time now, it is scary to imagine what it will be like without it, but I look forward to relishing the new opportunities and adventures that will come my way."
Moody won 71 caps for England and two for the Lions in the second and third internationals on the 2005 tour of New Zealand.
He picked up seven English Premiership titles and two Heineken Cups with Leicester before moving to Bath for the start of the 2010/11 season.
His chances of being selected for a second Lions tour in 2009 were affected by injury and his time at The Rec was plagued by similar problems.
But the man known affectionately as 'Mad Dog' remained one of the most-respected figures within the game thanks to his sheer commitment and dedication to his team's cause, whether that be in the green of Leicester, blue of Bath, white of England or red of the Lions.
"When I look back at playing with Lewis it always brings a smile to my face - it was never dull," was ex-England boss and Lions manager assessment of Moody's career.
"He was one of the most committed guys I ever played with and had a complete disregard for his own physical wellbeing.
"It's sad that he has had to retire but he should be remembered for a great career and someone who never gave less than 100 percent for his club and country."
Fellow Lions legend Sir Ian McGeechan, Moody's club coach at Bath, was equally lavish in his praise of the World Cup winner.
"Lewis has been a fantastic servant to the game, and I am disappointed I will not now have another opportunity to work with him on the training pitch and watch him deliver in a Bath jersey," added McGeechan.
"He has had a tremendous career and is a player I have greatly admired. He is always fully committed and is everything any coach would want in a back-row forward.
"He is someone whose opinion I trust and value, and he leaves a fantastic legacy from his time with Leicester, England and the Lions, which will long be remembered."