The first Test against India in Galle, beginning July 18, will be the last game for the 38-years-old Muralitharan, who has taken an amazing tally of 792 wickets in 132 Tests and 515 wickets in 337 ODIs.
Although Murali will no longer play after the first match of the three-Test series, he has kept open the option of playing the 2011 ODI World Cup, to be co-hosted by Sri Lanka along with India and Bangladesh.
"World's leading wicket-taker and champion spinner Muttiah Muralitharan has decided to retire from Test cricket after the first Test in Galle against India," a statement by Sri Lanka Cricket said.
"Muralitharan has had discussions with the national selectors, Sri Lankan Cricket officials and has had the blessings of his excellency Sri Lanka President Mahinda Rajapakse and the Minister of Sports C B Ratnayake," the statement added.
Cricket website Cricinfo however said that the wily off-spinner was contemplating retirement from all forms of the game.
The off-spinner, who was called for throwing by a few umpires during his illustrious career, has been one of the most talked about players in contemporary cricket.
Muralitharan is one of the most successful bowlers in the history of the game but controversies were an integral part of his successful career.
The cricketer, who made his debut in 1992 against Australia, had the world cricket debating about his unorthodox and weird bowling action.
Right from the onset of his career, his action came under the scanner and three years after making his debut he was called for throwing during the 1995-96 Australia tour by umpire Darrel Hair.
The International Cricket Council (ICC) recommended a biomechanical analysis at the University of Western Australia and concluded that his action created the 'optical illusion of throwing'.
The matter did not end there and again he was charged with suspected action in the 1998-99 Australia tour and this time Ross Emerson had doubts about his action.
He was sent for further tests in Perth and England and was cleared again. He faced the same charges in 2004 but the Sri Lankan kept on taking wickets and in the same year he overtook West Indies' Courtney Walsh's 519-wicket mark to become the highest wicket-taker in Test history.
His was an enthralling battle for supremacy with Australian leg-spinner Shane Warne as both kept re-writing the highest wicket record.
Warne retired with 708 scalps and Murali overtook him in December 2007 against England at his home ground in Kandy.
He achieved the grand double of being the highest wicket-taker in ODIs as well when he went past Wasim Akram's record of 502 wickets in 2009.
He could not do much in 2007 World Cup and it remains to be seen if he decides to play in the 2011 edition and help his side win their second World title.
He has said that it is difficult to bowl long spell for him and is expected to play T20 cricket.
He plays for reigning IPL champions Chennai Super Kings, who are due to play in the Champions T20 league in September in South Africa.
