Newby, who has three caps for New Zealand and won a Commonwealth Games gold medal in the All Blacks sevens squad in Manchester in 2002, has played 84 games for Tigers since his arrival at Welford Road in October 2008.
He ended last season with a stand-out performance in the Aviva Premiership semi-final win over Saracens in his first league start of the season, but has now been advised to retire due to an injury to his knee.
Newby, 33, said: “Coming to Leicester Tigers has been a great experience and I have a lot of good memories from playing for the club.
“We’ve been involved in a lot of big games, the semi-finals and finals in the Premiership and in the cup competitions. There have been a lot of highlights.
“Outside the rugby, the thing that stands out for me is that, although the club is a big business, it is also like a big family and everyone is very welcoming.”
Newby marked his Leicester debut against Sale Sharks in October 2008 by drop-kicking a conversion of a last-minute try by back-row colleague Brett Deacon, and was also successful in the historic shoot-out in the 2009 Heineken Cup semi-final against Cardiff Blues at the Millennium Stadium. He also scored three tries for the club.
The New Zealander was part of Tigers’ Premiership-winning squads of 2009 and 2010, started the Heineken Cup Final against Leinster in 2009 and collected an LV= Cup winner’s medal in 2012. He also captained the team at the 2011 Aviva Premiership Final at Twickenham.
Looking to the future, Newby said: “I’ve made some good mates in England. I love living here and that is something I want to continue to do.
“I would like to stay in rugby in some capacity, and coaching does appeal to me.
“I’ve worked with a lot of good coaches and top-class players in my rugby career, and I would like to think I've picked up a knowledge of the game that I would like to pass on in a coaching capacity somewhere.”
Tigers director of rugby Richard Cockerill said: “Newbs has been a key member of the squad in his four full seasons at the club.
“He is a quality player, and his knowledge of the game and his leadership qualities have been very important to us.
“It is sad to see his career come to an end due to his knee injury, but we all wish him well in the future and he will always be welcome here.”