That ruled the 47-cap Thompson out of both the RBS 6 Nations and - after discovering he required surgery, England's autumn defence of the World Cup.
"That's it," said Thompson, who claims doctors told him he could be paralysed or die if he continued playing.
Thompson has a disc problem in his neck which creates a loss of feeling down one arm.
He added in the Mail on Sunday: "I went to see a specialist, Nick Birch, at the Three Shires Hospital in Northampton and he showed me the results of a scan.
"My disc was squashing my spine and he told me I was very lucky to still be walking.
"If I had taken one more knock, I would have ended up paralysed, or even dead.
"I felt as if I'd emerged from a serious car accident alive, rather than thinking that something I dearly loved had been taken away from me."
England sent Thompson to Bristol to seek a second opinion from Ricky Nelson, who had successfully helped Jason Leonard and Phil Vickery with neck and back problems, but the original prognosis was confirmed.
Thompson said: "He told me I needed an operation to remove the disc because if I knocked it even during a mundane activity around the house it could kill me.
"I'll miss the game. I'll miss the journeys away with the lads. And I'll miss the adrenalin, the fear, the togetherness and the achievement."
As well as the 2003 World Cup, Thompson won the Six Nations Grand Slam with England in the same year and also lifted the 2000 Heineken Cup with Northampton.
He also played on the 2005 Lions tour to New Zealand.
Of his future, Thompson said: "I'd like to go into coaching and I've had talks with Keith Barwell, Northampton's owner, about a future role at the club."