The explosive hitter was bought by Punjab Kings for 42 million rupees ($467,000) for last season but only returned with 48 runs and four wickets in seven games, and was released by the franchise in November.
Maxwell, who has played in the IPL since 2012, said the league helped shape him as a cricketer.
“It's a big call, and one I make with a lot of gratitude for everything this league has given me," the 37-year-old wrote in a statement on Instagram.
"The IPL has helped shape me as a cricketer and as a person. I've been lucky to play with world-class teammates, represent incredible franchises, and perform in front of fans whose passion is unmatched.
"The memories, the challenges, and the energy of India will stay with me forever."
Faf du Plessis and Andre Russell also ruled themselves out of IPL 2026 last week, with the former South African captain instead choosing to play in the Pakistan Super League and the former West Indies all-rounder joining Kolkata Knight Riders' coaching department.
The 2026 IPL auctions will take place on December 16th.