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In a statement released through his team, Target Chip Ganassi Racing, Franchitti said he made the decision to stop racing based on the advice of doctors who have treated and assessed his injuries.
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Read: Franchitti hurt in Houston race wreck
"I was really looking forward to the 2014 season with Target Chip Ganassi Racing, with a goal of winning a fourth Indianapolis 500 and a fifth IndyCar Series championship."
Franchitti suffered a concussion in the wreck as well as fractures to his spine and ankle.
The wreck occurred in the last lap of IndyCar's Grand Prix of Houston on October 6, when Japanese driver Takuma Sato bumped Franchitti's car,[url=http://www.ibeats.se/]beats by dre[/url], sending it airborne into the protective fencing.
The car spun multiple times against the fence, sending shards of debris flying toward the grandstands and shearing off part of its side. Thirteen spectators were also hurt during the crash.
The Scotland native won IndyCar racing's top prize in 2012, 2010 and 2007. Franchitti ends his career with 31 IndyCar wins and 33 starts in the No. 1 position.
"I'll forever look back on my time racing in CART and the IndyCar Series with fond memories and the relationships I've forged in the sport will last a lifetime," he said.
Read: Franchitti leaves Houston hospital
"Hopefully in time, I'll be able to continue in some off-track capacity with the IndyCar Series. I love open-wheel racing and I want to see it succeed."
Franchitti was married to actress Ashley Judd for more than 11 years, but the couple announced in January that they were splitting up.