The six-year-old suffered a setback after he ran at Leopardstown last month on his first start in 490 days and will now be found a place at stud.
"He has been retired," said O'Brien. "When he ran down in Leopardstown he picked up another setback so after that we decided that he wasn't going to run again."
Rekindling, owned by leading Australian owner Lloyd Williams, started his career with David Wachman. He won three of his nine starts for O'Brien, contesting the 2017 Derby and winning a G2.
But his biggest day was at Flemington in November the same year when he defeated Johannes Vermeer, trained by Joseph's Dad Aidan, and Willie Mullins runner Max Dynamite in an all-Irish finish to the Melbourne Cup.
"He was a fantastic horse and gave me one of the best days of my career in Melbourne," said O'Brien. "I'm sure he's a very exciting stallion prospect wherever he ends up."
Following his Melbourne Cup triumph, Rekindling stayed in Australia where he had one start for Liam Howley, finishing last in the G1 Australian Cup in March last year.
Back with O'Brien this season, he finished sixth of 14 in an amateur riders' race last month. He retires with total winnings of £2.4 million.
Another Lloyd Williams horse, Yucatan, who won the G2 Herbert Power Stakes in Australia in 2018 when trained by Aidan O'Brien, has also been retired without having a start for Joseph O'Brien this year.
"He had a setback with us so he's not going to race for us, " said O'Brien. "He is a very well bred horse so I'm sure he will have a stud career somewhere."