Eadie, who has been sidelined since sustaining the injury nearly two years ago would have been out of contract at the Walkers Stadium at the end of the seaon anyway.
"The past few years have been very frustrating for me," he said.
"I've now got to the point where I've virtually said to myself I'm going to retire."
Eadie moved to Leicester from Norwich in December 1999 for a then club record of £3million.