Kohn's injury has proved a double blow for Harlequins as Will Skinner has also been forced to retire due to injury.
Kohn joined Harlequins from Bristol in July 2006 and made his debut in the pre-season friendly with ASM Clermont that summer. He has since made 139 appearances for the club and scored four tries. He made his international debut for Wales in this year's Six Nations Championship against Ireland.
Both Kohn and Skinner were members of the Harlequins squad that won the Amlin Challenge Cup in 2011 and the Aviva Premiership in 2012.
Harlequins Director of Rugby, Conor O'Shea said: "We are devastated that injury has forced both Olly and Will to retire. They have been and will always be remembered as true greats of this club and have inked their names indelibly into its history."
Kohn said: "I'm disappointed to have to retire as I thought I had a few more seasons to go. I will look back at my time in rugby, especially at Quins with many fond memories. I feel very lucky to have been part of a fantastic club with a great set of players and coaches that have helped me achieve some massive highs in my career.
"It's time for me to jump off the rugby rollercoaster and get stuck into the 'real world', whether that's in pigs and sausages or wearing a suit, who knows!"