Horsman played 62 games for Worcester, scoring four tries, but has been limited to just seven starts in the last two years.
Mike Ruddock, Director of Rugby at Warriors, said: "The news that Chris Horsman has been advised to retire from professional rugby has not been unexpected.
"Despite Chris making a huge effort to come through this latest setback, unfortunately the injury is of the type and magnitude that will prevent him continuing to play at this level.
"I wish Chris every success in the new challenges ahead and he will always be welcome back here at Sixways Stadium at any time."
Horsman signed for Warriors in July 2004 and quickly established himself as one of the best props in the English game and a ferocious scrummager.
The 32-year-old tight-head started his club career at Bath in 1997 before joining Bridgend in 2002. With the advent of regional rugby in Wales, Horsman was called up to the Celtic Warriors regional side, but when the club was disbanded due to financial difficulties in 2004, he was forced to seek another club, ending up at Worcester.
Although not Welsh born, Horsman qualified to represent Wales due to residency requirements and became a key component in the Welsh international set-up, making 14 appearances for his country and scoring one try against England at Cardiff.
Horsman made his full Welsh debut on 11 November 2005 against Fiji at the Millennium Stadium. He also won a call-up to the Wales squad for the 2007 Rugby World Cup after impressing on the domestic stage.