The 39 year-old has captained Pakistan in all three formats, and in 2009 led them to their only World Twenty20 title in England.
"I will be retiring… with my head held high," he told a press conference in Karachi.
"I think this is the right time as every sportsman has to take this decision in his career."
Younis hit a hundred in his first Test against Sri Lanka in Rawalpindi in 2000, which started a glorious career during which he also scored a double hundred in Pakistan's series-levelling win against India at Bangalore in 2005.
He needs only 23 runs to reach 10,000 Test runs, a milestone he missed out on after his team's disastrous tour of Australia in January this year, when Pakistan lost all three Tests.
He has so far scored 34 Test centuries in 115 matches -- the most by any Pakistani batsman -- and is set to become the first Pakistani and 13th batsman in the world to score 10,000 or more.
India's Sachin Tendulkar currently tops the charts with 15,921 runs in 200 matches.
"I was planning this for few months," he said of his decision to quit, but added that he "always tried to play for my team and for my country".
One of the worst moments of Younis' career was when Pakistan lost their coach Bob Woolmer during the 2007 World Cup in West Indies, he said.
Woolmer coached Pakistan from 2004 to 2007 but died in mysterious circumstances in Jamaica.
After lengthy investigations that even included the possibility of murder, Jamaican police on June 12 announced that Woolmer had died of natural causes.
"Those were very sad days for me," Younis recalled.
