Peter, who won three caps for Scotland, has taken the advice of medical specialists following a series of head injuries in recent seasons.
A favourite among the Glasgow Warriors fans, who saw him make 116 appearances over an 8-year period, including playing a key part in the squad that won the Guinness PRO12 in 2015, Murchie has spent the 2017/18 season with Stade Nicois in France in a player/coach capacity as part of Scottish Rugby’s partnership with the club.
He will shortly return to Scotland to continue his coaching experience within Scottish Rugby's development programmes.
Peter said: "I was told that I could possibly play again after a prolonged period of rest, but I was always going to retire at the end of the season so it made sense to stop now.
"I've not really had time to look back on my career yet but obvious highlights were the eight years I spent at Glasgow Warriors, what we achieved there and seeing the club grow, alongside winning my Scotland caps, which were a huge honour.
"It’s been my plan to coach for the past 5-6 years and I've got my coaching degree and Level 3 now so I've done lots of preparation and it is time to throw myself into that and look forward to staying in the game in a different capacity."
Scottish Rugby's Technical Director Stevie Gemmell said: "Peter has been a model professional. He is regularly name-checked by his fellow players as someone they have a huge amount of respect and admiration for and so for his playing career to end in this way is a real shame.
"We take the welfare of our players extremely seriously and ensured Peter received the best possible medical advice to allow him to make an informed decision about his future.
"Peter is clear in his coaching ambitions and Scottish Rugby will continue to support him as he makes that transition."