Mooy, 32, earned 57 caps and scored seven goals for Australia between 2012 and 2022, appearing at two World Cups.
The former English Premier League midfielder finished his impressive club career with a short, trophy-laden stint at Scottish powerhouse Celtic under former Socceroos boss Ange Postecoglou.
"I've been lucky enough to live out my dreams of playing for Australia," Mooy said in a statement on Friday.
"As a young kid, starting out in football you watch the national team on TV and imagine yourself there one day - to have lived that is something I'm truly grateful for.
"I've had the honour of playing alongside some of the best footballers that Australia has produced, creating lifelong friendships along the way.
"This has been a hugely difficult decision to retire, but I feel the time is right for the next generation to be given the opportunity to experience international football.
"As a group we were able to set a new bar (at the 2022 World Cup in Qatar) for the Socceroos and I believe we have the talent coming through to build upon that as work begins towards 2026."
Mooy's final game for Australia was December's World Cup round-of-16 loss to Argentina, his seventh appearance in the tournament.
The quietly spoken midfielder was crucial to Australia's qualification for, and run to the knockout stages in, Qatar.
Mooy also played an important role in qualifying for the 2018 World Cup in Russia, famously starring off the bench in Australia's play-off against Syria.
"We saw Aaron's qualities as a player on full display in Qatar, he was tremendous throughout the World Cup and integral to us reaching the round of 16," Socceroos coach Graham Arnold said.
"I thought the same watching him in Russia, he was able to rise to the occasion on football's biggest stage and show just how talented he truly is.
"A player like Aaron is a joy to coach, an exceptional talent who embodied the spirit of the Socceroos every time he took the pitch."
Having begun his career in Europe, Mooy exploded to stardom at Melbourne City with a standout 2015-16, when he recorded 11 goals and an A-League record 20 assists.
He was subsequently signed by Manchester City and loaned to English tier-two club Huddersfield Town, earning promotion to the Premier League before signing for them permanently.
Huddersfield were relegated after two seasons in the top flight but Mooy stayed in the EPL with Brighton, moving first on loan and then permanently.
He scored nine goals and notched six assists in 96 Premier League appearances across the two clubs.
Mooy had two COVID-19 interrupted years at Chinese club Shanghai SIPG before joining Celtic and winning the Scottish title and League Cup last season.
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