Williamson, 35, has been an all-format great across a 16-year career with his country, amassing 9515 Test runs and another 9831 in white-ball cricket.
He featured in the standalone Test against Ireland in Belfast last month, as well as the series opener against England at Lord's where he made scores of 0 and 18 on a pitch rated 'unsatisfactory' by the International Cricket Council (ICC).
With his side 1-0 down and with two Tests to play, at The Oval starting on Wednesday followed by a trip to Trent Bridge, he has chosen to call time.
"I've thought about it for a while, but over the last few days it's become clear now is the right time," he said.
"I've always felt a strong drive and hunger for international cricket and I take pride in knowing I've given it my all in every match I've played for New Zealand. Continuing with anything less wouldn't be right and I feel fortunate to step away on my own terms.
"I leave feeling optimistic about where this group is heading. There's a huge amount of talent and a real desire to do something special with this New Zealand team.
"It's a team I love, and I feel incredibly fortunate to have been part of it for so long. It will continue to be dear to my heart."
Williamson lifted the inaugural World Test Championship trophy as captain in 2021 and was named ICC cricketer of the year in 2015. He also captained two World Cup finals, including the super-over loss to England at Lord's in 2019.
New Zealand coach Rob Walter paid tribute, adding: "Anyone who's had the privilege of working with Kane understands he is a very special player and person.
"Kane's always put the team first and although we're disappointed to see him go, we're happy to know he's content and at peace with his decision. He's an incredible player, awesome teammate, a wonderful leader and a fantastic ambassador for our sport."
