The 34-year-old also played for Lisburn Distillery before a trophy-laden spell with Linfield.
"Tim has fought back from a number of serious injuries over the last few seasons, but has finally decided to hang up the boots," said Portadown.
Meanwhile, striker Tiernan Mulvenna has left the Shamrock Park club.
"We wish Tiernan all the best for the future and thank him for his efforts this season," the Premiership club added.
Mouncey made 234 appearances for Portadown and chipped in with 35 goals.
Portadown are 14 points adrift at the bottom of the Irish Premiership after a 3-2 defeat by fellow strugglers Carrick Rangers on Saturday.
Portadown midfielder Tim Mouncey has announced his retirement from the game after nine years with the club.