"I don't feel I have the motivation required to give 100 percent for another season, that's why I'm quitting," she told public broadcaster NRK.
"I thought it would be easier to say. I'm emotional. It has been an epoch in my life, over 20 years. So it's a bit special to say that this is my last season as an elite athlete," she said.
Bjørgen underlined her status as an all-time great in the sport at the games in Pyeongchang, South Korea earlier this year, when she grabbed a record-extending 15th Winter Olympics medal, winning the 30km cross country to put Norway top of the final medals table.
The Olympian had earlier become the most successful winter games competitor of all time by finishing third in the team sprint free.
Her bronze with Maiken Caspersen Falla put her on 14 Olympic medals, outstripping fellow Norwegian Ole Einar Bjørndalen, who has 13 in the biathlon.
Bjørgen is also the second most successful woman at either the Summer or Winter Games, trailing only Soviet gymnast Larisa Latynina with 18 medals.
She was showered with tributes from fellow athletes, and politicians, after the news broke on Friday.
"She was terribly important to me, she was my idol," said Therese Johaug, a seven-time world champion and former Olympic gold medallist who was suspended after failing a drug test.
"You have been a source of inspiration and a role model, you made us jump with joy and scream with excitement," former Norwegian Prime Minister and NATO Secretary General Jens Stoltenberg wrote on his Twitter account.
Bjørgen claimed her first World Cup victory in Dusseldorf in October 2002 and her first Olympic medal (silver) in Salt Lake City the same year.
She gave birth to her first and only son, Marius, in 2015.
Norway, a country of 5.2 million people, enjoyed a barnstorming Winter Olympics, breaking the United States' 2010 record of 37 medals at a single winter games.
Bjørndalen, the most decorated male Winter Olympian in history, also announced his retirement this week, saying he would quit at the end of the season at the age of 44.