The 35-year-old, who has most recently been playing for Wasps, has opted to retire as he prepares to embark on a new role in the financial world.
Downey became a staple feature of the Saints side after moving to Northampton from Calvisano to join the Jim Mallinder revolution in the summer of 2007.
He made a total of 148 appearances for Saints, helping the club reclaim its place among the Premiership elite.
He won National League One (now the Championship), as well as the EDF Energy Trophy, the Anglo-Welsh Cup and the European Challenge Cup.
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Downey was also a key man in the run to the Heineken Cup final in 2011, forming a formidable centre pairing with Jon Clarke.
But he will now look forward to a life outside of rugby, and he said: “I’ve really enjoyed every moment of being a professional player and have been lucky to have represented some great teams along the way.
“I am one of the lucky ones who can finish on my own terms, not having it cut short like so many do.
“I’ve loved every minute along the way and been fortunate to have had a few successful years too, but now I am looking forward to starting the next chapter in my life.”