"As a kid, playing in the NFL was always my dream and it turned out to be way more fun than I could've ever imagined," Hasselbeck said in a statement released by ESPN.
"Throughout 18 incredible seasons, I had the chance to forge many relationships with teammates, coaches and staff that I will cherish forever. With the support of my family, we've made the decision to embark on the next chapter."
The three-time Pro Bowler will appear in studio on Sundays during the season and will travel to the site of "Monday Night Football" each week.
Hasselbeck, a 1998 sixth-round draft pick by Green Bay, played his last three seasons for Indianapolis. Most recently, the Colts went 5-3 with Hasselbeck starting in place of Andrew Luck, who missed much of the season with injuries.
The Colts began 1-2 with Luck as the starter before Hasselbeck led the team to wins over Jacksonville and Houston when Luck went out with a shoulder injury.
Then when Luck suffered abdomen and kidney injuries against Denver in Week 9, Hasselbeck led the Colts to three more wins before missing the regular-season finale against Tennessee with injuries.
Hasselbeck signed with the Colts as a free agent in 2013. Before that he had a 10-year stint in Seattle, Hasselbeck led the Seahawks to Super Bowl after the 2005 season. Seattle lost to Pittsburgh, 21-10.
His best season was 2007 when he set career highs in multiple categories, including passing yards (3,966) and touchdowns (28).
Hasselbeck became a respected leader in the locker room and was elected co-alternate player rep with the NFL Players Association. Since 2012, he has served as vice president on the executive committee and became involved in issues surrounding helmet safety and improvement on concussion care for athletes.
"He has worked tirelessly on behalf of players, specifically in the area of health and safety," NFLPA Executive Director DeMaurice Smith said in a statement.
"All players past, present and future should know that that they are better protected on and off the field because of Matt's efforts. The NFL Players Association has been stronger with Matt as a part of its player leadership."