Koumas, who won 34 international caps, started his career with Rovers before a £2.5m switch to West Brom.
After five years with the Baggies, he joined Wigan for £5.3m, but had two loan spells with Cardiff before his return to Prenton Park in 2013.
"I know my own body and this is the right time for me to hang up my boots," he told the Tranmere website.
"I'm happy with the career I've had. I've played for some good clubs, met some great people and have plenty of memories.
"I wish I could have gone out on a high but it wasn't to be. Despite the results, I really enjoyed my last two seasons back at Tranmere and am glad I made the decision to return to the club."
Tranmere's former Wales midfielder Jason Koumas has announced his retirement at the age of 35.