Luongo was firmly in the frame to be selected in Arnold's squad, to be announced on Friday, for next month's tournament amid his career resurrection.
Arnold now has additional flexibility with his roster, as the Asian Football Confederation has confirmed to Football Australia that squads will be expanded from 23 players to 26 in Qatar.
Graham Arnold will name his Asian Cup squad on Friday. (James Ross/AAP PHOTOS)
But that won't include Luongo, who is a key part of second-placed Ipswich Town's push for promotion to the Premier League and would have missed up to six Championship games and an FA Cup fixture had he headed to Qatar.
Now at the tail end of his career, Luongo has never played in England's top tier, and will have the chance to remain a constant presence in Ipswich's bid to reach it.
He follows the likes of Aaron Mooy and Tom Rogic in retiring from the Socceroos over the past year.
"This hasn't been a decision I've taken lightly, but I've got to prioritise managing my body as my career goes on," Luongo said in a statement.
"I've loved my journey with the national team and will always cherish the moments I've had in this jersey.
"I look forward to watching on now as this group of young players drive the Socceroos culture forward."
Jackson Irvine is the only experienced midfielder remaining in the fold for Qatar.
Keanu Baccus, Connor Metcalfe, Aiden O'Neill, Alexander Robertson and Riley McGree are among the other midfielders.
Luongo, 31, brings the curtain down on a decorated international career, where he scored six goals in 45 appearances.
He was the player of the tournament in Australia's 2015 Asian Cup triumph on home soil, earning a Ballon d'Or nomination.
Luongo also played at the 2019 Asian Cup and attended the 2014 and 2018 World Cups.
"When it comes down to it, Mass needs to do what's right for him and his family," Arnold said.
"He's been through the highs and lows of football and throughout his career has shown us his prodigious talent, his incredible professionalism and his qualities as a leader.
"He's been an enormous contributor to the Socceroos across the course of his career and we wish him all the best."
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