Bull has scored 306 goals in all competitions in 561 games since signing from neighbours West Bromwich Albion in November 1986, a record that has ensured his cult status at Molineux.
He is currently with the squad on a four-game tour of Sweden and will remain with them until their return on Monday.
"I said I'd give it one last shot but after these latest problems I have to come to terms with the fact that I can't go on," he said. "I've been advised that retiring is the best thing to do."
Bull added: "In my heart I know that I have to accept that I've had a great career at Wolves and call it a day. I had hoped to play this season so I haven't given any really serious thought as to my future. I need time to think it all through."
Bull, who won 13 England caps and scored four goals for his country, made 462 League appearances for Wolves. He scored his last goal - his 250th in the League for the club - at home to Bury last September.Reuse content