The 33-year-old was released by Stoke in the summer after five and a half years with the club and did not play another professional game.
He was given a trial by Millwall last month but has been forced to hang up his boots.
Etherington wrote on Twitter: "Due to an ongoing back problem, the day has come for me to retire from professional football.
"I have some amazing memories since the day I made my debut at just 15yrs old
Thank you to all the great clubs I have played for and to the supporters.
"I have made some mistakes along the way but it has made me who I am today
I look at the past with pride and to the future with optimism."
Etherington began his career with Peterborough and made his debut in the Football League aged 15 years and 262 days in a win over Brentford in 1997.
He moved to Tottenham in 2000 along with fellow midfielder Simon Davies but struggled to establish himself and spent a spell on loan at Bradford.
His career really took off when he joined West Ham in 2003 and Etherington played nearly 200 games for the Hammers, appearing in the 2006 FA Cup final loss to Liverpool, before being sold to Stoke in January 2009.
Etherington had been secretly battling a gambling addiction - he estimates he lost £1.5million - and the move to the Potteries helped him kick the habit along with a week at the Sporting Chance clinic.
With his off-the-field problems behind him, he found some of his best form at Stoke and scored in their 5-0 FA Cup semi-final thrashing of Bolton in 2011.
He recovered from a hamstring problem to play in the final, when Stoke lost 1-0 to Manchester City, but his back issue became ever more limiting and he made just 12 appearances last season.
Etherington represented England from under-16 to under-21 level but never received a call-up to the senior side.
Source : PA
Source: PA