The 47-year-old American said she had played her last tournament in Australia after she and Leander Paes were beaten 6-1, 7-6 by Nenad Zimonjic and Elena Bovina in the Australian Open mixed doubles final on Sunday.
"I just wanted to go out on a winning note," said Navratilova, the winner of 18 Grand Slam singles titles.
"Losing in the final really stinks.
"I'm not saying goodbye to Australia, I'm just saying goodbye to tennis here."
The American, who began playing on the women's tour in 1973, has also won a staggering 173 women's doubles titles and nine mixed doubles Grand Slam crowns.
Navratilova and Paes, who was playing his first tournament since being sidelined with a brain abscess last August, were the defending mixed doubles champions in Melbourne.
The pair also triumphed at Wimbledon last July before Paes was struck down by an illness first thought to be cancer.
"I had a great run here. In August we were wondering if he was going to be alive, so let's count our blessings," Navratilova said of her 30-year-old partner.
Serbian Zimonjic and Russian Bovina broke both Navratilova and Paes's serves as they raced through the first set in 23 minutes.
Navratilova and Paes forced the second set to a tiebreaker, where Zimonjic and Bovina quickly opened a 6-1 lead before taking the decider 7-3 to win their first title together.
After her retirement, Navratilova hopes to work in the media and wants to get involved in tennis administration.
"I'd like to do some TV work. It's much easier talking about it than doing it," she said.
"I'd also like to get involved in the game at the political level."
