A Heineken Cup winner with the Tigers in 2001 and 2002 - and a try scorer in the 2002 15-9 final triumph over Munster at the Millennium Stadium - the full back scored 25 tries in 74 tournament appearances.
One of the elite six players to score 25 Heineken Cup tries he joined Leicester in 1997 and went on to make 316 appearances, scoring a club record 90 tries and winning seven Premiership titles along with that Heineken Cup back-to-back double.
Murphy has endured an injury-ravaged campaign and made his first start in six weeks against the Exiles last Saturday.
"I thought it was the right time to go," he said. "With the way my knee is at the minute I didn't have the confidence to sign on as a full-time player next year.
"I was contemplating playing part-time next year but with the way the budgets are there was just no room in the salary cap. The club then approached me and asked me to join the coaching staff.
"I've been lucky with the successes I've had and the guys that I've played with. I have a lot of fond memories. I've been very lucky that the club have been loyal and offered me a chance to stay involved."