Orton, 32, went 7-5 as the Bills' starter this season after replacing second-year quarterback EJ Manuel in Week 5.
"I just have been going at it for 10 years and it's just a family decision and I've decided to get home and be a dad and call it a day," Orton said in a statement.
The move caught some Bills players by surprise.
"It's one of those things, in talking to him, I didn't expect him to announce it so soon, or to announce it at all," running back Fred Jackson said. "I'll kind of pick his brain and see what made him decide to do so, but you got to respect it."
Orton, who signed a two-year deal in August, completed 64.2 percent of his passes for 3,018 yards in 2014, marking the third 3,000-yard passing season of his career.
With Orton retiring, the Bills enter the offseason with Manuel and Jeff Tuel, who ended the season on the practice squad, as their quarterbacks.
"It's one of those things where everything is going to be evaluated in the offseason anyway," Jackson said. "I can't say that it's a setback. I can't say that it helps us."