Kroos, 34, has won 22 trophies with Madrid since joining in 2014, including four Champions Leagues -- plus another with Bayern Munich -- and four LaLiga titles.
The midfielder first raised the prospect of retiring in 2022, before deciding to play on for another season, but has now chosen to end his career this summer.
"After 10 years, at the end of the season this chapter comes to an end," Kroos posted on Instagram.
"I would particularly like to thank everyone that welcomed me with an open heart and trusted me. But especially I would like to thank you, dear Madridistas, for your affection and your love from the first day until the last one.
"At the same time this decision means that my career as an active footballer will end this summer after the European Championship. As I have always said: Real is and will be my last club."