Allen, who won two England caps, played 124 times for Tigers after joining from Gloucester in 2009.
He appeared in four Premiership finals for Leicester, winning two, but he only played 11 times last season.
"I did not expect to play my last game at such a young age. But it's something I have had to come to terms with. It's extremely disappointing," Allen said.
"I've played alongside and against so many great players, I played in five Premiership finals with Gloucester and Leicester, played for my country and have shared in many massive occasions in 10 years as a player.
"I'd like to thank the Tigers for their support throughout this process and also thank my family and friends. I will hugely miss running out on to the pitch every weekend."
Allen, who was named Leicester's vice-captain before the start of the 2013-14 season, represented England in 2006 and was recalled to the international set-up for the tour to South Africa in 2012.
"He has always been appreciated by team-mates and coaches here for his work at the core of the team, as well as for his individual ability.
"He has also played a big role in helping the development of young players like Manu Tuilagi and Owen Williams alongside him in the backline.
"Anthony has an excellent understanding of the game and we hope to be able to use that knowledge within the club in the future."
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