The 30-year-old slalom specialist from Calgary raced for Canada in February in Sochi, Russia, and also in the 2010 Winter Games in Vancouver and Whistler, B.C. His best Olympic result was 42nd in giant slalom in 2010.
Spence finished in the top 20 on the World Cup circuit 14 times during his career. He underwent surgery on his right leg in June.
"The surgeon told me pretty bluntly that a lot of athletes have tried to return to high level sport after this and no one has been successful," Spence said in a statement. "I have to look at the next, 30, 40, 50 years of my life."
Spence broke his right leg and tore knee ligaments in a crash in Bormio, Italy, in 2005. It took three years of rehabilitation before he could return to racing.
"I'd had numerous doctors say I shouldn't return to sport," he said. "The proudest day for me was definitely putting the Team Canada gear on for the Olympics in Vancouver.
"I knew even before the Sochi Olympics that the end was probably going to happen sooner rather than later. At 30 years of age, I didn't have the years left in me to battle back from a surgery this big."
Spence intends to study commerce at Royal Roads University.
"I know there's more to me than just wanting to fire myself down an icy slope in Spandex," Spence said.