The second retirement of Andretti's career comes after his 16th - and apparently last - appearance at the Brickyard on Sunday.
The 45-year-old Andretti has led more laps (426) at Indy than any other non-winning driver.
"I'm glad I did what I did," Andretti said Monday about his last two races at Indy. "It was all good, but I was going crazy this month. I just felt there were a lot of things I could have been doing for the team and I couldn't do. So then it just distracts you. It's just too stressful and too much."
Michael, the son of 1969 Indy winner Mario Andretti and a longtime open-wheel star, retired after the 2003 May classic.
He returned to the Indy 500 last year to race against his then 19-year-old son Marco.
Michael finished third and Marco second that year, with Sam Hornish Jr. passing the youngster on the final straightaway to continue the saga of dismal Andretti luck at the Indianapolis Motor Speedway since the win by Marco's grandfather.
Michael, who said he came back this year for no other reason than to try to finally win a 500, was never a factor in Sunday's strange event, a truncated race interrupted by a three-hour rain delay and then cut 34 laps short by more rain.
His son, who again had a shot at winning the race, led three times for 13 laps. He wound up 24th after a spectacular and frightening crash that included a slide through the infield grass upside down. He was not injured.
Sunday wasn't all bad for the Andrettis, though.
AGR driver Dario Franchitti gave the team its second Indy win in three years, Danica Patrick was competitive all day and finished eighth, and Tony Kanaan led a race-high 83 laps before an accident relegated him to 12th place.
FORMULA ONE: Team McLaren is being investigated for a possible rule breach at the Monaco Grand Prix after Fernando Alonso finished first ahead of McLaren teammate Lewis Hamilton.
World motorsport's governing body, FIA, said in a statement Monday that it was reviewing evidence from Sunday's race. Alonso finished 4.095 seconds ahead of Hamilton, who was told by McLaren to slow down.
"He was obviously close to me, and I was told to take it easy," Hamilton said Sunday. "At the end of the day, I am a rookie. I am in my first season in Formula One, and I have finished second in only my first Monaco Grand Prix, so I really can't complain. I've got No. 2 on my car. I am the No. 2 driver."
Hamilton's fifth consecutive top-three finish in his debut F1 season helped him share with Alonso the top spot in the drivers' standings at 38 points.
McLaren leads the constructors' championship with 75 points, ahead of Ferrari with 56.
FIA said McLaren was being investigated for "a possible breach of the International Sporting Code" - the rules that govern world motorsport.
The code states it will punish "any fraudulent conduct or any act prejudicial to the interests of any competition or to the interests of motor sport generally."