Foster, 30, wrote a letter published on ESPN's The Undefeated explaining his decision to walk away.
"There comes a time in every athlete's career when their ambition and their body are no longer on the same page. I've reached that point," Foster said in the letter.
"My father always said, 'You'll know when it's time to walk away.' It has never been more clear than right now. I'm walking away with peace."
A four-time Pro Bowler, Foster spent his first seven seasons with the Houston Texans and is the franchise's all-time rushing leader. He ends his career with 6,572 yards and 54 touchdowns but dealt with constant injuries over the past several seasons.
Foster led the NFL in rushing yards in 2010 and in rushing touchdowns twice (2010, 2012). He was a First-Team All-Pro in 2010, racking up career-high totals of 1,616 yards and 16 scores on the ground.
Foster joined the Dolphins last offseason and played in four games this season, totaling just 55 rushing yards and failing to score a touchdown.
"I want to thank the Miami Dolphins, with everything in me, for allowing me to bow out with grace and making this process as easy as possible. It means everything to my family and I."
A native of Albuquerque in New Mexico, Foster entered the league as an undrafted free agent out of Tennessee in 2009.
He rushed for 2,964 yards and 23 touchdowns -- including 1,193 and 12 as a junior in 2007 -- over four seasons with the Volunteers. (Editing by Mark Lamport-Stokes)