The player made clear his desire to return to Anfield in the future, saying: "It is my sincere hope and wish that one day I can return to serve Liverpool again, in whatever capacity best helps the club."
Liverpool owner John W Henry and chairman Tom Werner said there would always be a place at the club for a player whose contribution was "almost beyond measure".
Manager Brendan Rodgers, who joined in 2012, added: "This is an era where the word 'legend' is vastly over used, but in his case it actually doesn't do him justice."
Gerrard's team-mates paid fulsome tribute to the player, with striker Mario Balotelli comparing him to legendary Italian midfielder Andrea Pirlo.
"Vision, technique but he is powerful as well. Stevie can do anything, he's an amazing player. It's going to be very difficult for the team to find another player like him in the future," he said.
Striker Daniel Sturridge added: "Stevie will always be a legend, not just for Liverpool but to England as well."
Former England star Gary Lineker, now a television pundit, said he was "one of the finest players to have graced the Premier League. A top, top player."
Fans expressed deep disappointment but wished him well, saying he would "never walk alone", referencing the club's anthem.
"He has been a great player for a great club and we wish him well for wherever he is going to go," Allan Pye, a 52-year-old electrician and Liverpool fan of more than 40 years, told AFP outside Anfield stadium.
Similar sentiments were expressed online, where hundreds of fans left tributes on Liverpool's official website.
"Can't come to terms of Stevie leaving! (sic) I've loved him since I was three. He will never walk alone," said one fan, Scott Moss.
"It won't matter what he does next, he will always be LFC [Liverpool Football Club] through and through. What a legend," said another, Barry Watkins.
Gerrard joined Liverpool's academy at the age of eight and has made 695 first-team appearances, scoring 180 goals.
He won the Champions League, two FA Cups, three League Cups and the UEFA Cup among other honours, although he also suffered agonising near-misses, notably never laying his hands on the Premier League trophy.
His performances have been below his previous high standards for much of this season, and the prospect of being a substitute in more matches next season will have affected his decision to quit.
"This has been the toughest decision of my life and one which both me and my family have agonised over for a good deal of time," Gerrard said.
He said he hoped his announcement now would end the distracting speculation about his future, but said he would be committed to the club until his last game.
Gerrard said he wanted to "experience something different in my career and life and I also want to make sure that I have no regrets when my playing career is eventually over".
-AAP
