The former world number one and three-time Grand Slam winner broke down at a press conference in Melbourne as he said the pain had become almost unbearable.
"I can play with limitations. But having the limitations and the pain is not allowing me to enjoy competing or training," the emotional Scot said.
Thirty-one-year-old "Sir Andy" said he would like to finish at his home Grand Slam in Wimbledon, but ruefully admitted he might not make it that far.
He will be remembered as the first British man to win Wimbledon in 77 years and as a player who battled his way to the top in a golden era for the game alongside Roger Federer, Novak Djokovic and Rafael Nadal.
"Wimbledon is where I would like to stop playing, but I am not certain I am able to do that," he said. "I've been struggling for a long time. I'm not sure I can play through the pain for another four or five months. Pretty much done everything that I could to try and get my hip feeling better and it hasn't helped loads."
He pulled out of last year's Australian Open to have hip surgery and only returned in June at Queen's Club in London.
He ended the season at Shenzhen in September after only a handful of appearances to concentrate on working his way back to full fitness.
But he was knocked out in the second round on his return at Brisbane last week and called it quits on Thursday after less than an hour of a practice match in Melbourne against Djokovic, with his movement clearly hampered.
"I think there is a chance the Australian Open is my last tournament," he said.
While he intends to begin his opening-round match against 22nd seed Roberto Bautista Agut next week, how his body withstands potentially gruelling five-set clashes in energy-sapping heat remains to be seen.
One of the so-called Big Four, along with Federer, Djokovic and Nadal, who have dominated the game for years, Murray's ranking has slumped to 230.
He hasn't reached a Grand Slam final since winning his second Wimbledon title in 2016, but has nevertheless enjoyed a glittering career since turning professional in 2005, with not only three Grand Slam titles, but two Olympic gold medals and 45 ATP crowns. AFP
COMMENTS
Comments are moderated and generally will be posted if they are on-topic and not abusive.
For more information, please see our Comments FAQ