Regarded as one of the most gifted game-breakers of his generation, renowned for his ability to score long-range tries, Forrester (27) suffered a horrific knee injury in Gloucester colours against Bristol at Ashton Gate in April 2007.
Although he battled back through a series of operations and intensive rehabilitation that included treatment from renowned specialist Bill Knowles in Vermont, who also worked with England's Richard Hill and Dan Ward-Smith, Forrester's comeback stalled when he suffered a breakdown during Gloucester's Guinness A League match against Sale last month.
"I have put everything I have into getting back to fitness and demanded more of myself in this recovery process than I thought possible but it is simply not going to be and I have been forced to make the hardest decision any player will ever have to make," Forrester told www.gloucesterrugby.co.uk
"Naturally, I am devastated my career has ended in this way but I have poured every ounce of effort into getting back to fitness for more than 16 months but I now know it's not going to be enough.
"I suffered a set-back after the game against Sale and have undergone another operation. That alone means I would be out for another eight months and it is simply not feasible to continue.
"I have had a wonderful career and have a treasure trove of memories. I have been fortunate to have been involved with Gloucester during one of their most high profile and successful periods in their history and I would like to thank everyone involved at the club for making it such a special place - it will always be with me."
Forrester, who won two England caps, graduated into the Academy set-up at Kingsholm from Bicester Rugby Club alongside his friend and former Gloucester full-back Jon Goodridge.
Following his debut in 2000-1, he made 134 appearances in all competitions and scored 51 tries - including the winner in the 2006 European Challenge Cup final against London Irish at The Stoop. He was renowned for his game-breaking qualities and scored three hat-tricks - two against Bristol at the Memorial Stadium and one against Caerphilly at Kingsholm.
Gloucester's head coach Dean Ryan added: "When any player's career is cut short through injury it is a tragic waste but even more so in James's case because he was such a prodigious talent.
"It is difficult to put into words just how hard he worked to return to full fitness - it was a testament to his desire to get back into the game after such a bad injury. He has played a massive part in Gloucester's recent history and his place within the club is assured."
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