The 36-year-old former England international played over 700 games for Chelsea and has been their most successful captain.
"John has given us more than two decades of dedicated and exceptional service," Chelsea said in a statement.
"In that time he has displayed the utmost pride at wearing the Chelsea shirt."
Terry is Chelsea’s third highest all-time appearance-maker and has captained them a record 578 times. (Reporting by Ed Osmond, editing by Pritha Sarkar)