Thompson had signed a two-year deal with the Saints in October 2020, moving to England from Australia, where he played over 200 games in the NRL - representing Canberra, St. George Illawarra and Manly.
The 32-year old has now decided to retire with one year left on his contract, citing personal matters back home in Australia as the key reason for his retirement.
"It’s not been an easy decision for me to call time on my career, but I do feel the end of the season is the right time to do that," Thompson told the club website.
"I will make no secret of the fact that although my short time over here in the UK has been enjoyable for me personally, it has been extremely tough for my family both here and in Australia with everything that is going on right now."
"Family comes first for me and that is ultimately why I am making this tough decision to return home at the end of the year."
St. Helens head coach Kristian Woolf is thankful for Thompson's contribution to the club and hopes that they can achieve success together for the rest of the season.
"I knew when we brought Joel into the Club what a professional he is and working with him has only emphasised that to me," Woolf added.
"I know how tough it has been for Joel’s wife Amy and the girls, but they fit into this club really well and we all thoroughly understand and respect his and his family’s decision. We now want to support Joel and his family to ensure they enjoy the rest of their time with us."
"Joel is not finished yet though and I know he is fully focussed on achieving success with this group this season."
Thompson made his NRL debut in 2008 with the Canberra Raiders, before signing with the St. George Illawarra Dragons in 2014 and the Manly Sea Eagles in 2018, then making the move to St. Helens in 2020.
The star second-rower scored 62 tries over his storied 234-game NRL career, and represented the Indigenous All-Stars seven times, including captaining the side last year.
Thompson also made a big impact off the field by founding The Mindset Project in 2012, which advocates mental-health and wellbeing, especially with the Indigenous community.
Thompson was also awarded the Ken Stephen Medal in 2016 by the NRL for his outstanding community work, especially with The Mindset Project.
Although retiring at season's end and moving back home to Australia, Thompson is still determined to achieve success with the time he has left at the Merseyside club.
"I want to wish the Club all the best in the years ahead, but my job is not over yet as I want to finish my year here with success both at Wembley and in the Super League. All my focus is on achieving that with St Helens," Thompson said.