The Los Angeles Clippers announced the news, which came as no surprise since Hill had been mulling his future after the team was eliminated in the first round of the playoffs. He had one season left on his contract.
"I've been hinting at it for the last few years and you get to a point where you just don't want to do it anymore. But I've enjoyed it, I've loved it," Hill said while appearing on TNT's pregame show before Game 6 of the Eastern Conference finals.
Hill appeared in just 29 games last season, his first with the Clippers, but he lent a valuable veteran presence.
Gary Sacks, the team's vice-president of basketball operations, called Hill "the embodiment of class, a true professional."
The 40-year-old forward averaged 16.7 points, 6.0 rebounds, 4.1 assists and 1.2 steals during a career that included stints with the Clippers, Detroit, Orlando and Phoenix.
"I'm certainly proud of what I've been able to do," he said after the Clippers lost to Memphis last month.
Hill struggled with injuries, particularly his troublesome left ankle.
After leaving Detroit prior to the 2000-01 season, he spent seven seasons with the Orlando Magic in which he was limited to just 200 games due to injuries to the ankle.
Before joining the Clippers, Hill spent five seasons with Phoenix. In 2010-11, he became the seventh player in NBA history to average 13 or more points at the age of 38 or older.
"Grant was an outstanding player and embodied the ideals of dedication and perseverance in overcoming injury and adversity during his distinguished NBA career," NBA Commissioner David Stern said. "He was always the consummate teammate and professional. We wish Grant and his family our very best and, hope he will continue to contribute to the growth of the league and the sport for years to come."
During the 2011-12 season with Phoenix, Hill had a medial meniscus tear in his right knee. He missed 61 games because of a sports hernia during the 2006-06 season with Orlando. He missed the entire 2003-04 season with the Magic while rehabbing his left ankle after having surgery on it the previous season.
In 2000-01, he had season-ending surgery to repair a broken bone in his left ankle.
Hill was named to the All-NBA first team in 1997. He was a three-time winner of the league's sportsmanship award.
After a standout four-year career at Duke, Hill was drafted third overall by Detroit in 1994. He and Jason Kidd of Dallas shared Rookie of the Year honours. Hill was named to the all-rookie first team that year and became the first rookie to lead the league in All-Star fan balloting.
At Duke, Hill helped the Blue Devils to consecutive national championships in 1991 and '92. He won a gold medal on the U.S. basketball team at the 1996 Atlanta Games. He was named to the 2000 U.S. Olympic team, but didn't play because of injury.
Hill is married to Grammy-nominated singer, Tamia. His father, Calvin Hill, played in the NFL.
Off the court, Hill has co-produced two documentary films and he was part of first lady Michelle Obama's delegation to the London Olympics last year.