The 35-year-old Yousuf, who holds the world record for most runs in a calendar year with 1,788 made in 2006, was banned by an inquiry committee of the Pakistan Cricket Board (PCB) two weeks ago.
"I have decided to retire as Pakistan player and my decision is not an emotional one," he said.
"It's of no use playing after such an insult which is unacceptable and I will announce my decision on Monday."
Yousuf led Pakistan on its twin tours of New Zealand and Australia between November and February, after regular captain Younus Khan withdrew over a lack of form.
Pakistan drew the three-match series in New Zealand 1-1 but lost all three Tests, five one-day and a Twenty20 match in Australia - results which prompted the PCB to investigate the reasons for the catastrophic tour.
The committee blamed infighting between Yousuf and Khan for the disastrous results, and recommended they "should not be part of the national team in any format", but no period of ban was specified.
Former captain Shoaib Malik and all-rounder Rana Naved-ul-Hasan were banned for one year besides being heavily fined. Shahid Afridi, Kamran Akmal and Umer Akmal were also fined and put on six-month probation.
Last week Yousuf vowed to appeal.
"I may still appeal, but a final decision will be taken on Monday," said Yousuf, who was also deprived of his annual central contract by the PCB last week, putting further question marks over his career.
Yousuf said his commitment in playing for the country had not been rewarded by the cricket authorities.
"I am deeply hurt because I have always played with commitment for my country and fans know this, but not those people who run cricket, this is a big tragedy," he said.
"My 12-year career is impeccable and I have never let down anyone."
Originally a Roman Catholic, Yousuf converted to Islam in 2005 and has since been involved in preaching besides playing cricket.
Yousuf has so far played 88 Tests for Pakistan, scoring 7,431 runs with 24 hundreds. He has also scored 9,624 runs in 282 one-day internationals.
He was declared the player of 2007 by the International Cricket Council.