Moody, a member of the 2003 World Cup-winning squad, has won 71 caps for England but he will now focus on his domestic form with Bath.
The 33-year-old told The Mail on Sunday: "I realised I might be making this decision before the World Cup started.
"It's a big decision to make and I feel emotional about making it, but it's the right thing to do for me and for the England rugby squad.
"My time with England has been unbelievable, even if the last few weeks have not gone so well."
England under-performed out in New Zealand, with them losing 19-12 to France in the quarter-finals and having been dogged by off-field controversies - and Moody believes that changes across the squad should now follow.
"It's only right for the team to move on," he said.
"There will be changes, maybe in management and definitely in some of the match-day 22, and if England want to start planning for a successful World Cup here in four years' time, then it is my belief that they should be appointing a new captain from February to see the team right the way through to 2015.
"Even if they still wanted me to carry on, there's no way I'd last another four years, so it is absolutely right to stand down now and give someone else the opportunity to captain England."
Despite calling for changes, Moody insists the squad retains its support for manager Martin Johnson.
"There is not a single member of the World Cup squad who does not believe Johnno should stay on and finish the job, just as Clive Woodward did after 1999," he said.
"I know the players are gutted that Johnno is taking so much flak. Nobody wants him to go."
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