Bond, who had to withdraw from the Test series against Pakistan after tearing an abdominal muscle, said never ending injuries forced him to take the 'tough' decision.
"The hardest thing is that I've always considered myself a Test bowler – and it was such a great feeling to be back in the team last month and playing Test match cricket with the Blackcaps.
"But looking back, so many of my injuries have come during Test cricket. Unfortunately my body just won't let me continue to play at that level, given the workload and demands of Test cricket," he said on the New Zealand Cricket website.
Bond, who had also aligned with the unofficial Indian Cricket League before returning to mainstream cricket, hoped his decision would help him prolong his one-day career.
"I don't want to end on an injury and I am absolutely committed to playing for the Blackcaps. This way I hope I've got a better chance of continuing to play. I hope I'll be able to continue to contribute to the team and to New Zealand cricket fans for a while yet.
"It's been a tough call, because Test cricket remains the ultimate form of the game – but I'm comfortable I've made the right choice," he said.
New Zealand Cricket Chief Executive Justin Vaughan said he was very disappointed but understood Bond's decision.
"Shane really showed his never-say-die attitude in his comeback this season, especially in the Test Match against Pakistan – and I know how tough this decision has been for him," Vaughan said.
"Of course we're disappointed that he won't be part of the Test line-up, but New Zealand Cricket supports his decision to focus on limited-overs cricket and hopes that this decision will prolong his international career.
"He remains one of the best fast bowlers in the international game and we're delighted that he’s doing all he can to keep playing," he added.
Bond finishes his Test career in the top 10 current international Test bowlers, standing at number nine in ICC Test bowling rankings.
He played 18 Tests for New Zealand since making his debut against Australia in November 2001. He has taken 87 Test wickets, at an average of 22.09.
His best Test bowling came against Zimbabwe in 2005, taking six for 51. He has taken five wickets in an innings on five occasions – the most recent against Pakistan in Dunedin last month.