The former captain made the announcement in a press conference at the SCG this morning.Ponting was dropped from the one day side for the first time in over a decade after a poor run in the series against India.
He played 375 matches one day matches, scoring 13,704 runs .
Ponting captained the side in 230 games and played some remarkable innings, including a memorable 140no in the 2003 World Cup final against India.
Australia strode through the 2003 and 2007 world cups under his leadership undefeated.
The former captain was dropped from the one-day squad yesterday.
While the 37-year-old overcame a career-threatening form slump to have one of the best series of his career in four Tests against India, the effort appears to have exhausted him and he has been unable to reach double figures in five one-day innings.
Ponting said on Friday night he wanted to keep playing, but the selectors told him of his fate yesterday.
Chairman of the selection panel John Inverarity said the champion was "disappointed" to hear the news.
If Ponting decides to continue playing Test cricket he will travel to the West Indies next month for a three-match series and will have no further cricket until next summer.
All-rounder Shane Watson was recalled to the ODI squad after completing a comeback Shield match for NSW. Plans are for him to miss the game on Friday in Hobart but come into the team for the final match against India on Sunday at the SCG.
Watson has not played for Australia since breaking down in the Johannesburg Test in November. Young bowler Mitchell Starc was dropped to make room for Watson.
Inverarity told The Australian last night that as far as he was concerned Ponting still had a place in the Test side if he wanted it, but conceded that the former skipper was considering his next move.
"We have dropped him from the ODI team. We're looking increasingly toward the 2015 World Cup," Inverarity said. "There is no intention to recall Ricky, but I have consistently said the door is never closed on any player.
"Of course there are implications for Test cricket. If he drops out of the ODI team, then there's a possible lack of momentum there. There are three Test matches in the West Indies, then as I understand it, there are no more Test matches until October or November."
Inverarity described Ponting as "one of the greatest players and one of the greatest ever ODI players" and the numbers back up his assessment. Ponting played his first limited overs match in 1995 and has played 375 matches, scoring 13,704 runs.
He captained the side in 230 games and played some remarkable innings, including a memorable 140no in the 2003 World Cup final against India.
Australia strode through the 2003 and 2007 World Cups under his leadership undefeated.
Ponting has had the worst run of his career in the past five ODIs, scoring 2,1,6,2 and 7.
"Ricky's contribution goes far beyond his batting statistics and brilliant fielding," Inverarity said.
"The example he sets in every respect and his extraordinarily positive influence in the dressing-room is acknowledged by all. He is held in the highest possible regard by his team-mates and there is no higher accolade than this."
Inverarity said it was a mark of Ponting's character that he accepted the task of captaining the side in Michael Clarke's absence over the past two games even though he needed a rest.
"We were looking to rest some players if the opportunity presented itself," he said. "We had a quick ring around and we were all of the view that Ricky should do the job and when I rang Ricky he wasn't keen to do it, but he said, 'Look I think it is the right decision. I will do it for the sake of the team and that is always paramount'.
"He is a fantastic man as you would know. He's a wonderful bloke. He does his duty, he is selfless, he always thinks of the team."
Inverarity said the selectors held informal discussions during Sunday's ODI but were unanimous in their decision when they had a phone hook-up yesterday.
Inverarity made it clear Ponting was dropped "due to his lack of form in the five Commonwealth Bank Series matches to date."
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