The 36-year-old Davis, who led the National League with 43 saves in 2018, clinched the World Series title for the Royals in 2015 with a game-ending strikeout against the New York Mets.
Davis returned to the Royals in 2021, going 0-3 with two saves in 40 appearances.
"Wade will forever be remembered by our fans, his teammates and our organization as an elite competitor and a very classy person,'' Royals president of baseball operations Dayton Moore said in a statement.
The Royals acquired Davis from Tampa Bay in December 2012, converted him to a full-time reliever in 2013 -- he had 47 saves over four seasons with Kansas City -- and then traded him to the Chicago Cubs after the 2016 season.
Competitor. Closer. Champion.— Kansas City Royals (@Royals) November 24, 2021
Congratulations on your retirement, Wader. pic.twitter.com/uIZ6uBTiGc
He spent one season in Chicago, completing a four-year, $12.6 million contract with three options that wound up totaling $35.1 million in salary. He then signed a three-year, $52 million contract with the Colorado Rockies.
Davis was 63-55 with a 3.94 ERA and 141 saves in 161 chances over 88 starts and 469 relief appearances for Tampa Bay (2009-12), Kansas City (2013-16, 2021), the Chicago Cubs (2017) and Colorado (2018-20). He was an All-Star from 2015-17.
The right-hander was 4-0 with a 1.80 ERA and eight saves in the postseason, including 3-0 with a 0.36 ERA and four saves for the Royals in 2014 and '15.
The Associated Press contributed to this report.