"It has been an absolute privilege to play for such a great club and of course I wish the team the very best for the future."
Celtic chief executive Peter Lawwell added: "Everyone at the club is devastated at the news of John's retirement.
"John is a young man who has been an absolute credit to this club and someone who had one of the brightest futures in the game. We are all deeply saddened by this news.
"John is someone who fought his way through the Celtic ranks to become a first-team star - something which is a magnificent tribute to his talent and ability.
"No-one will ever forget how he performed in the Nou Camp that famous evening back in 2004 and no-one will ever forget how he was so cruelly injured in his prime.
"We thank John for everything he has given us - the club will be doing all it can to provide John with as much support as possible."
Kennedy's first knee injury kept him out of the game for almost three years
In total, Kennedy made 45 appearances for Celtic after coming through the Glasgow club's youth ranks.
Capped 15 times for Scotland's Under-21 side, Kennedy's senior international career was restricted to the fateful match against Romania, when a tackle by Ionel Ganea resulted in the defender's first knee injury.
"It's really sad for the boy," said current Scotland manager George Burley.
"This is a big blow to John, his family and everyone who knows him.
"He's been through a lot of heartache over the years. At one point he was one of the most promising defenders Scotland had.
"You never know what can happen in football, it shows you the ups and downs of a footballer. Whatever career he decides on, we wish him all the best."
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