"I always promised myself I would never flog myself into the ground, to the detriment of my performance," the Wasps player told Friday's Times newspaper.
"You can't underestimate the effect rugby has on your body -- it's getting harder to play the game as I did four or five years ago. This is no reflection on England's recent results, it's all about timing and at some stage you have to be a bit selfish.
"It has been a fairly traumatic decision to make and it may surprise some people. But there are some great opportunities coming my way that I can't afford to miss out on, which make me very excited about going to that next level of my career.
Jones rules himself out of England running
"I can go out at the top of my game, still enjoying my rugby."
Since the World Cup Dawson has enjoyed a rocky relationship with England and particularly coach Andy Robinson, who took over from Clive Woodward in 2004.
He was dropped from the squad later that year when he opted to attend a recording of the BBC's A Question of Sport, on which he is a regular team captain, rather than an England training day.
He was recalled for the 2005 Six Nations but has remained in competition with Leicester's Harry Ellis for the number nine shirt.
Dawson started only one of England's five Six Nations games this year, the 31-6 thrashing by France in Paris, though he was regularly used as a replacement when his experience often added some control to a ragged England side that ended the tournament in fourth place for the second year running.
He spent most of his career with Northampton, making his England debut against Western Samoa at Twickenham in December 1995.
He established his worldwide credentials in the Lions tour of South Africa in 1997, throwing a memorable dummy for a try in the first test that set the tourists on the way to a 2-1 series win.
He also featured in the 2001 tour to Australia, upsetting coach Graham Henry with a newspaper column criticising the management on the day of the first test and made two appearances as a replacement in last year's ill-fated trip to New Zealand.
His most important contribution in an England shirt came in the World Cup final when his last-minute break took England close to the Australian line before he then spun the pass to Jonny Wilkinson to land the winning drop goal.
After moving from Northampton to Wasps in 2004 he won the English Premiership trophy and, newly enthused, always appeared likely to remain in contention for the World Cup next year.
Dawson's retirement means that only six, possibly seven, of the starting XV from the World Cup final remain available for international selection after injury and retirement ruled out the rest.
Josh Lewsey, Mike Tindall, Ben Cohen, Ben Kay, Steve Thompson and Lawrence Dallaglio, who changed his mind about retiring earlier this season, are all available for Robinson while Richard Hill remains a long shot to return after long-term injury problems.
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