The 29-year-old, who will be hoping to face the British & Irish Lions this summer, earned the last of his 35 Test caps to date in the 23-18 loss to Australia during last year's Tri-Nations campaign.
New Zealand Rugby Union chief executive Chris Moller said while it was sad to see a player of Spencer's calibre leave New Zealand, he understood the reasons for his decision.
Moller said: "Carlos has thrilled the New Zealand rugby public during his career and brought great joy to supporters over the years. On behalf of the NZRU I would like to thank him for the immense contribution he has made to rugby in New Zealand."
Moller applauded Spencer's longevity in the game and added: "He is one of the few players still playing who played in the inaugural season of the Super 12 in 1996.
"He has represented New Zealand, New Zealand Maori, the Blues and Auckland with pride and commitment and we wish him well in this next phase of his sporting career."
He made his first appearance for New Zealand in 1995 against Languedoc-Roussillon in France and the following year helped kick-start the Super 12 competition with the Blues.
In the ensuing seasons his flamboyant style of play has endeared him to the Blues faithful and as one of their most influential figures has helped them to three titles.
Form and injury this term, however, have prevented him from joining the exclusive '100 club' made up of fellow All Blacks Anton Oliver, Justin Marshall and Tana Umaga and Australia skipper George Gregan who have brought up a century of games for their respective franchises.