"I will quit at the end of the season, no matter how well we do in the Champions League or Serie A," the former Czech Republic international told UEFA's website after Wednesday's 1-0 defeat at Chelsea in the Champions League last 16.
"The decision is final and I don't think I will change my mind -- I don't need to. It is the right time to quit."
The 36-year-old, who is a regular starter, almost retired at the end of the 2006-07 and 2007-08 seasons before signing consecutive one-year deals with the Turin club, whom he joined from Lazio in 2001.
"I'm still enjoying playing but considering my physical and mental condition I understand that the time has come to make way for younger players -- they deserve to play," he added.
The attacking midfielder was awarded the 2003 Ballon D'Or after helping his team to reach the Champions League final, although he was unable to play in the defeat to AC Milan on penalties because of a suspension.
He won the 2002 and 2003 Serie A crowns in Turin and stuck with the club after they were relegated to Serie B and stripped of the 2005 and 2006 titles because of Italy's match-fixing scandal.
Nedved notched up 91 caps with the Czech Republic between 1994 and 2006 and was the driving force behind the team that reached the final of Euro 96.
Lazio brought him to Italy from Sparta Prague after that tournament and he helped the Rome club to lift the 1999 European Cup Winners' Cup and the Italian league title the following year.
