“It’s been a decision that hasn’t come lightly, over the last month especially,” Watson said talking to reporters.
“I know it’s the right time to move on and still hopefully play the shorter formats of the game, one-dayers and T20s.
“I’ve been through a lot of different waves of emotion about what is right for myself, my family and most importantly the team as well.
“I just know it’s the right time to move on. I don’t have that real fight in me, especially for Test cricket, knowing the lengths physically that I’d have to go through, mentally and technically as well, to be at my best in Test cricket, so I just know it’s the right time.”
Watson played 59 Tests for Australia, scoring 3,731 runs and taking 75 wickets.
Watson had sustained a calf injury in yesterday’s 64-run ODI win over England at Lord’s cricket stadium.