Citing his age - he is 37 - and a series of injuries that kept him out of South Africa's recent international matches, Wessels said the time had come to scale down his participation in the game.
"When one gets to my age you've got to start looking ahead," he said. "There has to be a time when one says `enough'."
With Wessels as captain, South Africa made a successful return to the international arena in 1991 after being banned for two decades because of apartheid.
They reached the semi-finals of the World Cup in 1992 and won or drew every Test series under Wessels, except for a loss in a one-off Test against the West Indies.
Wessels finally stepped down as captain last month and South Africa lost to New Zealand in the first Test they played under their new captain, Hansie Cronje.
Since then, knee trouble and a broken nose, with accompanying sinus problems, have been bothering the former leader.
"In simple terms, he has a gut feeling that the time is right for him to retire from Test cricket," Ali Bacher, the managing director of South Africa's United Cricket Board, said.
"He is the gutsiest cricketer I have ever had the pleasure of knowing," Bacher continued. "I am certain the successes would never have been achieved without his fierce determination and his total commitment and obsession for South Africa to succeed in international cricket."
Wessels, meanwhile, said that he planned to continue playing provincial cricket for Eastern Province.
He left South Africa during the Republic's years of sporting isolation caused by apartheid and went on to play 24 Tests for Australia, opening his international career with a century against England.
He returned to play for South Africa in their final series of matches against a rebel Australian team and, soon after the country was readmitted to international cricket, the left-hander was appointed captain of the national squad.
But his career became plagued with injuries, especially during the Tests against Australia and England this year, and he took no part in the recent series against New Zealand.