Wozniacki, who turned professional at 15 in 2005, spent 71 weeks at the top of the WTA rankings after first becoming the world's best player in October 2010.
She has won 30 WTA titles so far in her career, including the 2017 Tour Finals in Singapore.
Wozniacki, who finished 11 straight seasons in the world top 20, is currently ranked 37th after struggling with injuries and poor form in 2019, reaching only one final.
She said she wanted to focus on family life with her husband and former NBA champion David Lee, as well as raising awareness of the auto-immune disease she suffers from, rheumatoid arthritis.
"In recent months I've realised that there is a lot more in life that I'd like to accomplish off the court," said Wozniacki, who was briefly engaged to four-time golf major champion Rory McIlroy in 2014.
"Getting married to David was one of those goals and starting a family with him while continuing to travel the world and helping raise awareness about rheumatoid arthritis (project upcoming) are all passions of mine moving forward.
"So with that, today I am announcing that I will be retiring from professional tennis after the Australian Open in January.
"This has nothing to do with my health and this isn't a goodbye, I look forward to sharing my exciting journey ahead with all of you!"
"Finally, I want to thank with all my heart, the fans, my friends, my sponsors, my team, especially my father as my coach, my husband, and my family for decades of support! Without all of you I could have never have done this!"
Wozniacki will end her career with appearances in the WTA event in Auckland and the Australian Open — the first grand slam of 2020, which gets underway on January 14.
The crowning moment of her career came at Melbourne Park last year, where she downed Simona Halep in a dramatic three-set final, having earlier saved two match points in the second round against Jana Fett.
Wozniacki's other two grand slam final appearances came at the US Open, ending in defeats to Kim Clijsters in 2009 and good friend Serena Williams five years later.
Fellow players took to Twitter to congratulate Wozniacki on her career. German legend Boris Becker said on Twitter "enjoy your last ride in Melbourne" and Andrea Petkovic wrote: "We love you, you're such an inspiration."
Czech star Donna Vekic, Brit Johanna Konta and Heather Watson all posted love hearts in response to Wozniacki's Instagram post and Lee also shared his admiration for his wife.
"Hall of Fame career! I couldn't be more proud of you and so excited to see what the future brings! I love you wifey!" he wrote.
Frenchwoman Kristina Mladenovic added: "Congratulations on an absolutely amazing career @CaroWozniacki. So many great things to come, wishing you & David only the best!"
Nicole Gibbs said "can't wait to see what's next. Love you" and retired Aussie star Casey Dellacqua wrote: "Awww forever a champion. You've had one hell of a career Caro, so much to be proud of. Can't wait to see what's next for you."
Clijsters, Lucie Safarova and John Isner were other major players in the tennis world to congratulate Wozniacki on her achievements in the sport, while musician Lukas Graham and actress Olivia Munn were among the celebrities to do the same.
Winter Olympics legend Lindsey Vonn also paid tribute, writing: "Amazing career!!! So much to be proud of!! Now on to the next chapter!! We can hang out in the retirement club!"
