"I would have liked to continue a few more years, but this is my last season," a tearful Bjørndalen told a news conference, citing health and family time as reasons behind the retirement.
Since making his professional debut in March 1993, Bjørndalen went on to win 13 Olympic medals (eight gold, four silver and one bronze).
That leaves him as the men's record medal holder in the Winter Olympics and number two overall behind compatriot Marit Bjørgen, the cross-country skier who set a new record of 15 medals after starring at last month's Pyeongchang Games in which he didn't compete.
He realised a remarkable "grand slam" at the 2002 Salt Lake City Olympic Games, winning four gold medals in each of the events.
Bjørndalen said the "the rawest experience of (his) life" was four years earlier during the Nagano Games in Japan.
While tough weather conditions deprived him of a first Olympic title on the 10-kilometre (six-mile) sprint, he managed to overcome his disappointment and win the race the following day.
This was also around the time that his fierce duels with France's Raphael Poiree started, drawing broad media attention to the sport.
During his exceptional career, Bjørndalen, dubbed "the Cannibal", amassed 95 individual victories in the World Cup, including one in cross-country skiing, and 179 podium finishes. He also claimed the overall World Cup biathlon title six times.
But poor results this season meant he missed out on a seventh Olympics in Pyeongchang.
Instead, he coached his Belarussian wife (and biathlete) Darya Domracheva, who left South Korea with a relay gold medal and an individual silver medal.
"The season did not go as planned with performances not as good as I and others had expected," Bjørndalen told a news conference on Tuesday.
The Norwegian, known for his thoroughness and diligent preparation, said he had been diagnosed with atrial fibrillation, which could lead to blood clots, stroke and heart failure.
"I would have liked to say that I'm fed up and jaded, but I'm not. Now, I wish to slow down on the advice of the medical team and my family," he added.
Thomas Bach, president of the International Olympic Committee (IOC), hailed Bjørndalen as a "role model".
"Ole Einar Bjørndalen is one of the greatest of all time," Bach told AFP.
"He has proven this time and again in competition, but more importantly, he has established himself as a true Olympian and a role model for young athletes around the world."
While some already see Bjørndalen as a candidate to head up the International Biathlon Union (IBU), he said he wanted to spend some time thinking about his future.