Bagdhatis rose to a carrer-high number eight in the world rankings in 2006, having reached the Australian Open final in 2006 and the semi-finals at Wimbledon later that year.
However, he has slipped to 134 in the world rankings, after a 15-year career on the ATP Tour.
Baghdatis is estimated to have earned 9 million U.S. dollars in prize money.
Between 2006 and 2010, he won four ATP singles titles in Beijing, Zagreb, Stockholm and Sydney.
Baghdatis said on his website on Monday that the decision to quit professional tennis was not an easy one.
"It has proven tough for me, especially physically, to come back to where I feel like I belong. Even though my mind wants to do it, the limits of my body have prevented me to maintain and play at a consistent high level as I expect from myself."
"Especially the last two years have been very difficult for me with recurring injuries and pain," he said.
He said that with "a beautiful wife, two young daughters, and a third child on the way" he could not be more excited to spend more time with all of them at home.
Baghdatis said he will be heavily involved in tennis in a number of capacities, so people will continue to see him on the tour.