Panthers captain Wallace retires from NRL

Penrith captain Peter Wallace has been forced to call time on his rugby league career with immediate effect due to chronic knee problems.

It's understood 32-year-old Wallace texted his teammates on Monday to announce his decision and will continue limited training in case the Panthers need him to play in an emergency.

Wallace will take up a position as part of the club's coaching staff, lending his expertise to the Panthers' junior ranks.

"It's an incredibly selfless act from Peter. He always had great faith in the young players coming through our system here at Panthers and has played a huge part in their development as both footballers and people," Penrith Panthers General Manager Phil Gould said in a statement on Tuesday.

"It can now be revealed that Peter has played the last two years with no ACL in his knee after his last knee reconstruction actually failed.

"He is a tremendously tough individual and his leadership has been wonderful for our club."

It was originally hoped the veteran hooker would return for the Panthers against the Roosters this weekend but Wallace only watched on at training on Monday.

Peter Wallace played almost 240 NRL games. Pic: AAP

Wallace stepped up to captain the Panthers from the start of the year after Matt Moylan departed the club.

The veteran hooker debuted with the Panthers in 2005 and had a six-year stint at the Broncos before returning to Penrith.

Wallace was selected for the Blues in State of Origin 2008 and infamously ruptured a testicle in game two, before playing the last of his four games for NSW in 2009.

Gould says he can see Wallace enjoying a long-term coaching future at Panthers.

"He has enjoyed an outstanding playing career. He now moves into the next stage of his life and Panthers will always be here for him."