The 30-year-old Ireland international was plagued by a hip complaint, which limited him to just three RaboDirect PRO12 games and Munster's four opening games in the Heineken Cup following his return from the World Cup.
The backrower had signed a two-year contract extension in February but he joins experienced duo Jerry Flannery and David Wallace in calling an early end to his career in this campaign.
Leamy made the first of his 144 Munster appearances in September 2001 and went on to represent the province in both the 2006 and 2008 Heineken Cup finals while he also had an illustrious international career for Ireland.
Capped 57 times, Leamy was a member of the 2009 Grand Slam-winning side, was twice a Triple Crown and played in two World Cups.
He said: "I find it hard to put into words how much it has meant to me to play for Munster and Ireland. It was a dream come true and I was very lucky to play with some of the greatest players ever to wear the jerseys and feel blessed that I was part of winning teams.
"I've had a great career, wish it had gone on a little longer but I'd like to thank all the coaches, players, medical staff and management who have helped me over the past decade.
"It's been a great honour to be involved with such an outstanding group of people.
"I'd also like to thank the fans most sincerely. I fully appreciate the sacrifices they've made, spending their hard earned cash to cheer us on, be it Munster or Ireland, at home games and all over Europe.
"Their support has been truly fantastic and a memory I'll carry forever."
Munster Rugby chief executive Garrett Fitzgerald added: "We are obviously very disappointed that Denis has been forced to call it a day particularly when he is in the prime of his career.
"An outstanding back-row player throughout his career, I believe his contribution to Munster and Irish rugby has been inestimable.
"His fierce determination on the field was mirrored by his work ethic off it and he leaves Munster rugby with our gratitude and best wishes for the future."
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