The 32-year-old Spaniard moved to the top of the rankings in 2003 after winning the French Open and reaching the U.S. Open final, where he lost to Andy Roddick.
In 14 years as a professional, he won 15 titles and helped Spain win two of its five Davis Cups in 2000 and 2004.
"It was a complicated decision to leave a world you have lived in intensely,'' he said Wednesday. "But I have had a tough year and you start to notice that you don't have the same ambition and motivation.''
Ferrero plans to devote time to his tennis academy and hotel.
The Valencia Open runs Oct. 20-28.