Hussey, 37, has scored 19 hundreds in 78 Tests and averages 51.52.
The West Australian's departure places pressure on Australia's selectors to settle on a suitable batting line-up by the end of the India Test tour in February-March ahead of the Ashes series in England starting in July.
Hussey's recent form has been excellent and he's averaging 180.00 after two Tests in the current series against Sri Lanka with scores of 115 not out, 31 not out and 34 in Hobart and Melbourne.
Hussey has told the Nine Network that with four children under eight, it's time to spend more time at home.
"The Sydney Test against Sri Lanka will be my last Test match for Australia and I'm going to retire from international cricket at the end of the Australian summer," Hussey said.
"I was quite excited to tell them (children) that I'm not going to go away and play for Australia any more.
"They were happy but not as excited as I thought they were going to be. So it was a bit of a shock."
Hussey says any Test match is a stressful experience, but next week could be different.
"I feel like I can come into this last Test match with no pressure whatsoever," he said.
"I can just really go out there and enjoy it."
Australia lead the three-match series two-nil.
Hussey, who made his Test debut at 30, has become Australia's 12th-leading runscorer with 6183 runs at 51.52.
His retirement will follow the departure last month of ex-skipper Ricky Ponting, Australia's all-time leading runscorer.