Teixeira fought back tears Friday as he announced that his 14th season in the major leagues will be his last. At 36, he has decided to retire at the end of the season.
"I got to live out my dream," said Teixeira, who has hit 404 career home runs and won a World Series with the Yankees in 2009.
Teixeira said in spring training that he hoped to play another five years. He has missed time because of problems with his neck and knees, however, and he said his decision to call it a career was made at the All-Star break.
"I just realized my body can't do it anymore," Teixeira said. "If I'm going to grind through seasons not being healthy, I'd rather be home with my kids.
"My neck hurts almost every day. The knee thing popped up. It all kind of dawned on me that's not in the cards."
Teixeira is in the eighth and final year of the $180 million contract he signed as a free agent in December 2008. He said he kept the decision to himself at first, but after the Yankees went into sell mode at this week's non-waiver trade deadline, he understood there would be questions about his future.
"I don't want to be a distraction," said Teixeira, a three-time All-Star and five-time Gold Glove winner.
Teixeira was in the lineup for Friday night's 13-7 win over the Cleveland Indians. He doubled in the first inning after receiving a warm ovation, then legged out a single in the third and took third on Brian McCann's double.
"It was special tonight," he said. "I had a lot of the Indians come over and say congratulations, and the umpires, just telling me that they enjoyed watching me and playing against me."
At .202, his batting average reached .200 for the first time since before play on May 20.
"It had to be really rewarding for the game that he had tonight," Girardi said, adding that he'll continue to play Teixeira "as much as I can [the rest of the season]."
Teixeira's best season came in 2009, his first with the Yankees, when he hit .292 with 39 homers and 122 RBIs and finished second in American League MVP voting.
He said he was proudest of hitting at least 30 home runs and driving in at least 100 runs for eight straight seasons from 2004 through 2011.
He was limited to 15 games and a .151 average in 2013 after he tore the tendon sheath in his right hand while with the U.S. team at the World Baseball Classic. He had surgery that July and missed the remainder of the season, then hit .216 with 22 homers and 62 RBIs the following year, when the hand was still regaining strength and he was slowed by a hamstring injury.
Fully recovered, he made the All-Star team again in 2015 but fouled a pitch off his right leg Aug. 17, played two more games in pain and then found out he had fractured his shin. He finished the season with a .255 average, 31 homers and 79 RBIs.
Teixeira hasn't appeared in more than 123 games in a season since 2011.
Teixeira, chosen by the Texas Rangers with the fifth overall pick in the 2001 amateur draft, also played for the Rangers, Atlanta Braves and Los Angeles Angels in his 14-year career. He owns a .269 career batting average with 1,281 RBIs.
Teixeira's potential successor at first base is 23-year-old Greg Bird, who is missing this season after shoulder surgery in February.
On Friday, Teixeira said it mattered to him to retire as a Yankee.
"I gave you everything I had," he said, speaking to Yankees fans as his voice cracked. "It wasn't always enough, but I tried my best."
Information from The Associated Press was used in this report.