The 34-year-old suffered the injury in the Heineken Cup quarter-final defeat to Leinster in April and has been advised by medical experts to hang up his boots.
The number eight won eight caps for New Zealand and captained Auckland Blues to the 2003 Super 12 title before moving to the Welsh region in 2005, going on to score 22 tries in 153 appearances.
He captained the region between 2006 and 2008 and helped the Blues to Anglo-Welsh Cup success in 2009 and Amlin Challenge Cup glory in 2010.
He joins director of rugby Phil Davies' coaching staff but admits it has been hard to accept that his playing career is over.
He said: "It's not really sunk in that I won't play again because it's the off season.
"When the boys kick-off back down at the Arms Park then I think reality will hit and I'll miss being out there with them.
"This would have been my 17th season and I would have been a professional rugby player for as long as I haven't been a professional rugby player, so it's going to take a bit of getting used to."