The 32-year-old called an end to his international career at a shock press conference at Twickenham on Tuesday.
Dallaglio regained the captaincy from Martin Johnson after England's victory at the 2003 World Cup, his second spell in charge of the team.
Favourites to replace him for November Tests against South Africa, Australia and Canada are Jonny Wilkinson, flanker Richard Hill and prop Phil Vickery.
Dallaglio, who will continue to play for Wasps, enjoyed a nine-year England career that has seen him collect 73 caps, including 22 as captain.
"I have a huge season ahead, helping to defend the European Cup," said Dallaglio.
"I always knew I would know when the time is right to retire from international rugby, and now is the right time."