The Englishman's decision means he will not be in Sheffield to defend the world title he won for a fourth time by beating Ali Carter in the final last May, and his manager Django Fung confirmed that he could be leaving the game for good.
"Yes," Fung told the BBC when asked if permanent retirement was possible. "Let's hope not. You never know with Ronnie - he's an emotional player."
O'Sullivan had originally been understood to be battling depression having pulled out of last week's International Championship in China, but Fung insisted that he was "mentally fine".
"In six months time he may have decided to come back," Fung added.
"We all have personal problems and some can handle them better than others. When he has these personal problems, Ronnie finds it difficult to concentrate on snooker.
"He's had glandular fever which has been dragging on for some time.
"He also has issues with his children and getting access and he's finding it difficult with all the travelling.
"He needs to get access to see the children and sometimes that coincides with tournaments."
The player himself has admitted of late that he has been finding it hard to play with everything that is going on in his private life.
"I am struggling to get back into it and I am regretting signing up even for the tournaments I have done," said O'Sullivan in a recent interview. "I'm finding it very difficult. Last year I had a massive push at it.
"Everyone knew how difficult it was for me, but I gave it one last go with my top-16 place under threat. I won in Berlin, had a good finish to the season, capping it with a fantastic 17 days in Sheffield. It is not coming easily for me to want to practice, which is unusual for me. It is not going how I thought it would."
"I have spoken to Ronnie and he has decided to withdraw from any events he has entered, and he will not be playing for the rest of this season," said World Snooker chairman Barry Hearn.
"He has some personal issues which he needs to resolve and we wish him all the best for the future."
O'Sullivan is widely regarded as the most naturally gifted player to pick up a cue and proved it with a bewitching performance in claiming the sport's most coveted trophy for a fourth time to go with his victories in 2001, 2004 and 2008.
He refused to sign the official players's contract with World Snooker in June because he did not want to commit to such a hectic schedule. He seemed to have changed his mind when he competed at the Players Tour Championship in September, losing to unknown Simon Bedford.
Despite dropping to 20 in the world due to inaction, O'Sullivan is guaranteed entry as world champion to the last 16 of tournaments, but has quit the sport just weeks before two of the biggest events in the game - the UK Championship at York's Barbican Centre and the Masters at London's Alexandra Palace.
O'Sullivan has threatened to quit on numerous occasions in the past, but his latest decision is a huge blow to the sport with the Englishman widely regarded as snooker's biggest crowd-puller.