The 30-year-old, born in the Seychelles, won the 200m individual medley gold in Delhi to become a double Commonwealth champion following success in the 200m backstroke in Manchester back in 2002.
But Goddard, who has also competed at three Olympic Games and reached the 200m backstroke final in Athens in 2004, feels it was time to explore new avenues.
"I'm 30 years old now and there's a lot of good talent coming through who are swimming really well," he said.
"I think everything is set up for me to retire. It's time to find something new in my life. I've been a full-time international swimmer since I was 18 and after 12 years it's time to find new experiences outside of training and competition.
"I've represented my country at three Olympic Games which I'm honoured about but, looking back over such a long career, the one point that stands out for me came in 2002.
"I won the Commonwealth Games in Manchester at just 19. It was in my home town and I was in front of so many family and friends. That was a really special moment for me. I was so young and wasn't expecting to win gold and a bronze that also followed."
Bill Furniss, the head coach of British Swimming, was quick to pay tribute to Goddard's achievements.
"James has been a fantastic servant and ambassador for the sport for so long," he said.
"He is one of the most talented swimmers that Britain has ever produced and has had a long and wonderful career.
"I'd like to thank James for his valuable contribution to the sport and for the role he has played within the national team where his character will be greatly missed."