Houghton began her career at Sunderland in 2002, had three-year spells at Leeds and Arsenal, and joined City in 2014.
She played 241 games for City and is their most decorated player, having won eight major trophies – four Continental Cups, three Women’s FA Cups and the FA Women’s Super League title in 2016.
Houghton also won two WSL titles with Arsenal in 2011 and 2012, also helping the Gunners to five cup victories.
She was awarded an MBE in 2016 for her achievements in women’s football but hopes to spend more time with her family now.
“Ultimately it’s the best thing for me and my family,” added Houghton.
“Obviously Stephen – everybody knows that’s been tough – so I need to be a little bit more unselfish with my time and try to create more memories with him.
“By retiring, it allows me to have that time. Family means everything to me. They have always been there throughout my career.”
Houghton had a hugely successful international career, playing at two World Cups and two European Championships, as well as two Olympic Games for Team GB.
But she struggled for game time this season, making only five league appearances as City missed out on a second Women’s Super League title by goal difference on the final day to Chelsea.
Houghton admits she was “maybe not getting enough reward” for the time she prioritised on football this year.
“It’s not always going to be good, it’s not always going to be bad, and having that bit of perspective has really helped,” Houghton told BBC Sport.
“That’s one of the reasons I have decided to retire – that mental strain, in terms of playing at the top level. You are always under pressure to perform.
“Sometimes that takes its toll and was probably part of my decision. When you get to a point where I was in my career – sitting on the bench, using a lot of energy to be the captain, to be the leader – and maybe not getting enough reward.
“Things are put in perspective quite quickly [with Stephen’s condition]. It was time I put more energy into my family and being a part of Stephen’s life a lot more.”