His decision means he will no longer be eligible for New Zealand.
"I spoke to Hamish about the decision earlier today. I believe he likely had a future with the Blackcaps," New Zealand manager Lindsay Crocker said.
"However I accept his reasons for pursing the certainty of a career in county cricket."
Marshall is a six-year veteran of the New Zealand team and two weeks ago was among 20 players offered contracts for the coming year.
He is currently playing for Gloucestershire as an overseas player but is eligible to play as a local because he holds an Irish passport.
"This has been the most difficult decision of my life," he said.
"This has not been an easy decision but I now look forward to the future and hope that I will still have opportunities to play in New Zealand before my career finishes."
Marshall cannot return to the New Zealand fold until he relinquishes his local player status in England.