Allen had not played since the 2013-2014 season but has been regularly linked to rumors of a return.
Allen, 41, had not played since the 2013-2014 season but has been regularly linked to rumors of a return in the two years since.
However the 10-time All-Star formally drew a line under his career in a letter addressed to his younger self on The Players' Tribune website on Tuesday.
"I write this to you today as a 41-year-old man who is retiring from the game," Allen wrote.
"I write to you as a man who is completely at peace with himself."
Allen, a virtual certainty to enter basketball's Hall of Fame, is the NBA's all-time leader in three-pointers with 2,973.
He averaged 18.9 points, 4.1 rebounds and 3.4 assists in 1,300 games during a career in which he forged a reputation as one of the greatest three-point and free-throw shooters the sport has ever seen with averages of 40 and 89.4 percent.
Allen was chosen as the fifth outright pick in the 1996 draft by the Minnesota Timberwolves before being traded to the Milwaukee Bucks.
He joined the Seattle Supersonics in 2003 before heading to the Boston Celtics in 2007 where he later was part of a formidable line-up featuring Kevin Garnett and Paul Pierce.
In their first season, Allen, Garnett and Pierce led the Celtics to their first title in 22-years.
After six seasons with the Celtics, Allen chased more glory with a a move to the Miami Heat, where he landed another championship in 2013 alongside LeBron James and Dwyane Wade.
In his letter on the Player's Tribune, Allen referenced his former team-mates.
"Kevin Garnett, Paul Pierce, LeBron James, Dwyane Wade. The men who you are going to win championships with are all going to be very different people," Allen said in the letter.
"What makes them champions is the boring old habits that nobody sees. They compete to see who can be the first to get to the gym and the last to leave."
Allen's career also saw him win a gold medal at the 2000 Olympics with the United States.
Outside of basketball, Allen has also dabbled in acting, winning rave reviews for his performance alongside Denzel Washington in the 1998 Spike Lee drama "He Got Game" in which he played a basketball player.