The 30-year-old Victorian is the most successful men's quad tennis player of all time, with 23 grand slam titles to his name.
The record features 15 singles crowns, including an active run of seven-straight at his home slam at Melbourne Park.
"I'm forever grateful for the opportunity that I've had to do the thing that I love for so long, but the time has come," Alcott said.
"I feel redundant, I feel old, I feel a bit washed up.
"The next generation is coming and it's their turn to dominate and get the recognition that they deserve.
"I'm really looking forward to getting out there and doing my thing one more time and hopefully making it 16 (major singles titles), we'll see what happens."
Alcott has been a paraplegic since having surgery to remove a tumour that was wrapped around his spinal cord during the first few weeks of his life.
He was bullied about his disability as a child and confessed he "hated" himself growing up, but said tennis saved his life.
Since winning his first grand slam title in 2015, Alcott has used his growing public profile to help shift the conversation around people living with disability.
"I'm super proud (of my career) and probably more proud of the work we've done off the court, to be honest," he said.
"Being a good tennis player is probably the 32nd priority in my life, and I mean that.
"(I've tried to be) a good advocate for my community to change perceptions for people like me so they can live the lives that they deserve to live and get the opportunities that I've had."
Alcott is coming off a career-best 2021 campaign, when he became the first man in any form of tennis to earn a calendar year 'golden slam' of all four major titles and Paralympic or Olympic gold.
Prior to dominating the quad tennis scene, Alcott won Paralympic gold (2008) and silver (2012) medals with Australia's men's wheelchair basketball team.
Tennis Australia boss Craig Tiley led tributes to Alcott after the retirement announcement on Tuesday.
"Dylan is an incredible person," Tiley said.
"His influence, infectious personality and positivity has impacted countless people and across a far wider field than just sport or tennis."
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