The 33-year-old, who is attracting transfer interest from clubs in Turkey, confirmed the decision was made with a "heavy heart" in an emotional social media post as he called time on representing the country of his father's birth after 19 caps.
It means he will not travel away during the next CONCACAF international window between January 28 and February 3 when Canada are due to play World Cup qualifiers against Honduras, the USA and El Salvador.
Arfied, if called up, would have likely missed three Rangers fixtures - including the Old Firm fixture at Celtic Park on February 2 - but his availability now rests on whether the player remains at Ibrox beyond the end of the transfer window.
Turkish clubs Hatayspor and Alanyaspor have been credited with an interest and are said to be willing to pay a small fee to sign him this month ahead of his contract expiring in the summer, when he could leave Ibrox for free.
The last time Arfield played for Canada was in November 2019 but the former captain of the national team had been in talks about ending his international hiatus ahead of the FIFA World Cup 2022 in Qatar.
He confirmed his international retirement in an Instagram post, which read: "It’s with a heavy heart that the time has come to officially announce my retirement from the Canadian men’s national team.
"I have loved every minute representing Canada. I am extremely grateful for the opportunities and experiences I have been given both on and off the pitch.
"From day one in the programme, I have stated that this team under the right guidance will fully reach their potential and I’m proud to see it coming to fruition.
"I have a fantastic relationship with John Herdman and want to thank him for trusting and giving me the honour to captain the team in his early days as manager. Thanks to every staff member, every supporter and every team mate along the way.
"I’m desperate to see the boys get to Qatar and let the world see what a fantastic place Canadian soccer is in.
"Thank you, It’s been a pleasure."