Kelsay made up his mind this week and traveled from his offseason home in Nebraska to inform general manager Buddy Nix of his plans during a meeting at the team's facility on Wednesday.
"As I kind of went back and forth on it, I believe if you think about retirement that much, you're already retired," Kelsay said during a conference call. "So I'm happy with the decision and look forward to the next chapter of my life."
Kelsay began considering retirement after tearing a ligament in his neck during practice. He missed seven of Buffalo's final eight games, and finished on the injured reserve list.
Though he has since been cleared by team doctors, Kelsay was concerned about his body starting to wear down.
Another factor that weighed into his decision was going through another offseason of having to prove himself to a new coach. The Bills hired Doug Marrone last month to replace Chan Gailey, who was fired after three losing seasons.
Starting with Gregg Williams, the Bills are on their fifth head coach since selecting Kelsay in the second round of the 2003 draft.
The Bills defense is also in transition under Mike Pettine, who becomes the unit's third coordinator in three seasons.
Kelsay made his decision early enough in the offseason to allow the team an opportunity to assess its plans before the start of free agency in two weeks.
He had two years left on his current contract, and was scheduled to make $3.725 million in base salary this season. Kelsay said there had been no discussions between him and the team to restructure his contract.
Kelsay was a three-time defensive captain, who finished with 32 1/2 career sacks to rank ninth on the team list. A starter since 2004, he also proved durable in playing in 147 games, including 120 starts. Last season marked the first time Kelsay played in fewer than 12 games.
He is one of only three Bills defensive linemen to have at least three interceptions. Kelsay enjoyed his best season in 2006, when he finished with 5 1/2 sacks and was credited with 88 tackles.
Kelsay's biggest frustration was being part of a team that has gone 13 seasons without a playoff berth -- the NFL's longest active drought. During Kelsay's tenure, the Bills enjoyed just one winning season, when they finished 9-7 in 2004.
"Obviously, it's something that is frustrating, something that we didn't achieve," Kelsay said. "We're going to turn the corner. It's just a matter of time. I see good things in the near future for the Buffalo Bills."
In a statement released by the team, Nix called Kelsay a "consummate professional" and someone who will be missed.
"He always gave 100 percent regardless of the situation and regardless of the score," Nix said. "I know he will be successful in whatever he chooses to do next."