The Feroz Shah Kotla Stadium hosts the first T20I of the series against the Black Caps on November 1.
Nehra has been afforded a farewell game at his home ground, a mark of the esteem in which he is held by Indian cricket.
A BCCI official claims Nehra has made his decision known to coach Ravi Shastri.
Nehra has played 17 Tests and 120 ODIs, while his tally of T20Is is at 26 with one match left in the Australia series.
"Yes, Ashish has told both Ravi and
Virat that he does not want to continue beyond November 1 when India
plays New Zealand at the Feroz Shah Kotla," said the unnamed senior official.
"Obviously, there is some element of surprise. One thought that he
would like to continue till the home season against Sri Lanka. But he
feels, it's the right time to move on."
The official intimated that Nehra would have called it quits after
the third T20I in Australia but for there being a match at his home
ground so soon afterwards.
"Bhuvneshwar Kumar and Jasprit Bumrah are form
bowlers and Ashish felt that it's only fair in the interest of the team
that they continue," the official added.
"Bhuvi has improved as a T20 bowler in leaps and bounds and Ashish said that the pair should continue.
"Had there not been a match at Kotla next month, Ashish would have
retired after playing the third T20 International at Hyderabad on
Friday, October 13."