The 37-year-old Elfsborg midfielder made his international debut against South Africa in November 1999 and has gone on to make 148 appearances in the yellow and blue jersey, including two FIFA World Cups™ and two European Championships.
Svensson passed the previous record of 143 caps held by goalkeeper Thomas Ravelli in the World Cup qualifier against Kazakhstan in September, but Sweden's failure to qualify for next year's tournament in Brazil has prompted him to move aside for other players to come through.
The Scandinavians were beaten by Portugal in the play-offs last month.
"I've decided to hang up my international boots," Svensson told the Swedish Football Federation's official website.
"It's one of the toughest decisions I've ever made but I've realised it's time for me to step aside and make room for the younger players who are knocking on the door to the national team.
"I still think it's great fun (to play for the national team) and together we have a fantastic group. So it still hurts that we won't be playing at the World Cup in Brazil next summer. And that was my last chance to do so."