The 32-year-old American called it quits following a series of ankle injuries, the most serious of which cost him the entire 2001 MLS season and another keeping him to only a single game for the 2008 campaign.
But Olsen returned this year to play 20 games, producing one goal and helping United stay in the play-off chase into the final weekend of the season.
Olsen, who scored six goals in 37 matches with the national team from 1998 through 2007, was the 1998 MLS Rookie of the Year and helped United capture the USA league crown in 1999 and 2004.
"Ben Olsen has been the heart and soul of D.C. United," team president Kevin Payne said. "You can't replace a player like Ben. You simply hope that other players can step up and shoulder the mantle that he carried for so long."