Injuries, especially to her left knee, have prevented her from competing at her highest level recently, Paerson said in a statement posted on the Swedish ski federation's website Monday.
The 30-year-old Paerson won 19 medals at major championships, has won 42 World Cup races since her debut in 1998 and clinched two overall titles, in 2004 and 2005.
Having won bronze in the slalom at the 2002 Salt Lake Games, she returned four years later to capture gold in the same event in Turin. All up at three Olympics, she won four bronzes and a silver to go with her gold.
The races in Schladming, Austria, this week will be her last.
"My career has been fantastic and I've achieved more than I could ever dream of," Paerson said. "The last years, with all the spectacular crashes and protracted injury problems, have reduced my chances to perform at the top level.
"I have always been a fighter and this is a tough decision, but after some time of thoughts and many discussions with myself I feel I'm ready for new challenges in my life."
Paerson was the first skier in history to win World Championship gold medals in all five disciplines.
She said the highlights of her career included her three gold medals at the 2007 worlds in Are, Sweden, and her bronze medal at the 2010 Winter Olympics. She opened those games in Whistler with a horrendous crash in the downhill — sliding across the finish line headfirst — then came back 24 hours later to win bronze in super-combined.
"I just couldn't let the hill in Whistler defeat me," Paerson said. "In addition, I'll always remember the great duels between me and Janica Kostelic, and other fantastic skiers."
Paerson said she would serve on the Athletes Commission of the international ski federation for another year.
The Swedish Ski Association said Paerson's "achievements will always be in the hearts of the Swedish people."