The four-time Stanley Cup champion and seven-time Norris Trophy winner made the announcement Thursday.
The 42-year-old Lidstrom played for the Red Wings in each of his 20 seasons and set an NHL record by playing 1,564 games with one team. He put retirement on hold in each of the previous two years by signing one-year contracts.
Lidstrom had 34 points and a plus-21 rating that ranked among the league leaders last season. He missed a career-high 11 games with a bruised right ankle and was out for another game with the flu.
The Swede was named the NHL's best defenseman last year for a seventh time, matching Doug Harvey's total and trailing Bobby Orr's record by one.