The 30-year-old will retire immediately, but will continue to play for his club side Bayern Munich, Bild newspaper reported, citing national team sources. A spokesman for the player later confirmed the report.
The spokesman quoted Lahm as saying it was the "right time" for him to step down.
He told coach Joachim Löw about his decision on Monday, the morning after the World Cup win, and in a phone call on Friday morning, Lahm informed the president of the German Football Association (DFB) Wolfgang Niersbach.
Niersbach said in a statement: “Philipp called me this morning and informed me personally about this step. I quickly realized during our conversation that it was futile trying to talk him out of this decision.
"In his ten years in the national side he was not only an outstanding player but a great role model, I thanked him for all that he had done for the DFB.”
Lahm led the German team to their first World Cup in 24 years on Sunday and has played 113 times for Germany. On Thursday he was shortlisted for European Footballer of the Year.
The announcement came as a shock to German football fans. The right-back, who also plays as a defensive midfielder, played every game in the tournament and appeared to be at the peak of his form and fitness.
Neither has he been plagued by injury worries.
PHOTO GALLERY: World Cup winners welcomed home
Fans took to Lahm's Facebook page to express their shock and sadness but also to thank him.
"Thanks for everything," one wrote, while another wrote, "What's wrong with you?"
"We still haven't won the Euros," another said.
The news was also met with a mixed reaction by fans on Twitter.
He surveyed his kingdom and wept, as there was nothing left to conquer. #Lahm
— Jordan Benterman (@JBenni) July 18, 2014
— Ashish (@fussballgott31) July 18, 2014
I don't get it, he's just 30 y.o. and just once got injured in his whole career. He's the most fit player in the team, why retire? WHY! #Lahm
— Jason Mardini (@JasonMardini) July 18, 2014