Smith said the strain of the 2017 Origin series and Rugby League World Cup had helped make his mind up.
The Melbourne Storm captain, 34, made the surprise announcement on Tuesday.
He said: "That is something that I did think about when I was coming to my decision". I feel really good.
"The origin series in particular had an effect on me both physically and mentally out of any year I played", he said.
"I'd like to think it will give me the opportunity to play on in our domestic competition if it is the right thing for my family and the Melbourne Storm as well".
"I couldn't back up after any of those Origin matches and maybe that was a sign there that it was time, because I have always been very proud of my ability to back up and it's something I've looked forward to. That's a big sacrifice but it's a bigger sacrifice for them".
He also paid tribute to his wife Barbara and his children.
His exit coincides with the representative retirements of Johnathan Thurston and Cooper Cronk, which were announced a year ago.
With this year's Origin series looming large, the Maroons side suddenly has a good news/bad news situation on their hands. "It's a massive blow", Walters said.
The call is likely to springboard Brisbane hooker Andrew McCullough into contention for a Queensland debut in the June 6 series opener, while Jake Granville of the Cowboys could be another option.
"We'll get to that in the next couple of weeks", Walters said.
A playmaking hooker and goalkicker, Smith took over as Queensland and Australia captain in 2012 and was voted the Rugby League International Federation's player of the year.
As a stalwart of the Maroons, Smith oversaw the greatest period of dominance ever seen in the series, with Queensland winning 11 out of the past 12 series. Queensland lengthened from $2.15 to $2.50.