Armstrong, 28 has been forced to retire early from the game after he was diagnosed with Multiple Sclerosis in December 2009 and has struggled with his illness ever since, though did make seven appearances for Reading this season.
"Obviously this has been a very difficult decision," said the former Bury, Oldham and Sheffield United man.
"I absolutely love football but this is the right thing for me professionally, medically and also personally."
Armstrong added: "With the illness, both the medical team and I didn't feel I could regularly perform to the level you have to in the professional game.
"I've been very fortunate to play for Reading and all my other clubs, I've been lucky to have a career that I know many people would be delighted to experience. I'll miss being a part of the game on a daily basis."
Reading manager Brian McDermott said: "Chris has been an inspiration to me.
"Over a long period I've had many conversations with him. He's a quiet, unassuming man who sums up everything that is good about human beings. Nobody could have tried harder and given more than he has given.”
He was signed by Neil Warnock in July 2003 in a £100,000 transfer deal from Oldham Athletic – a price the cash strapped Latics thought was undercut in terms of evaluation – and made his debut on the opening day in a 0-0 draw with Gillingham.
Armstrong stayed at Bramall Lane for five years although he did spend one month on loan at Blackpool in October 2005.
In all he made 84 (+21) appearances for United and scored six goals before joining Reading in August 2008 in a £500,000 deal.