The 31-year-old won 24 Scotland caps and was the first Scot to start Tests as a forward and a back since 1878.
He had two spells at Glasgow Warriors, winning the PRO12 in 2015, before joining London Scottish, but now wants to "build my new career in the city".
"After 13 years of professional rugby I know the time is right to hang up the boots," said Vernon.
The Dundee-born player began his career as a back-row known for his pace and ball skills in open play, before converting to centre in 2013.
He won his final four caps in the Scottish backline, the last of which came at the 2015 Rugby World Cup - Vernon's second appearance at a RWC.
Vernon also had spells with Border Reivers and Sale Sharks and represented Scotland Sevens in the 2014 Commonwealth Games.