The announcement by the 29-year-old comes as no surprise as she has not competed in any tournaments for more than a year.
Peer said: "I want to share with you one of the most difficult decisions I have had to make in my life. After 23 years of playing tennis including 13 years as a professional player, I'm retiring.
"I came to this decision due to a chronic inflammation in my shoulder, which has plagued me for more than two years and does not let me compete at the highest levels that I am used to.
"I look back with a huge smile, full of satisfaction and I'm proud of my achievements and the way that I represented Israel."
Peer also admitted that she had lost her passion for the game. She reached 11 in the WTA rankings – the highest position of any Israeli player.
Peer won 11 WTA tournaments and $5.2 million in prize money in a career that saw her reach the quarter-finals of the Australian Open in 2007.