The 31-year-old defending champion lost out to nemesis Anna Meares of Australia in controversial fashion, 2-0 in the best-of-three final.
And rather than retiring disappointed, the Olympic record holder was more pleased to sign off from the world of cycling with a silver medal.
“I am so relieved right now,” she said. “I’m sort of a bit overwhelmed by emotion I would have loved to have won on my final race but I’m kind of just so glad that it’s all done and I can move on.
“I’m glad that it got to that stage, I think she is the best rider in the field and it’s the way it should have been, if everything turned out right it should have been Anna and myself in the final she’s a fantastic competitor.
“We’ve met many a time, I wish her all the best but I’m very glad to be saying that that’s the last time I’ll be going through that.
“I can’t believe it’s all over.”
The nine-time world champion, who won the first-ever women’s keirin gold on Friday, thought she had won the first race but was controversially relegated for straying out of the sprint lane.
And Pendleton failed to clinch the second race denying the capacity velodrome crowd a grandstand finish.
“I was really annoyed because I was sure she touched me first and it caused me to move up - I can’t believe twice in one competition I’ve been relegated. It’s unheard of so a bit of a surprise and it knocked my confidence. I have to say I really tried in that last ride.”
Pendleton had the opportunity of three golds at London 2012 but was denied when she and partner Jess Varnish were also relegated in the team sprint for an illegal changeover.