"Manchester City can confirm the termination of Nadia Nadim's contract," City said in a short statement.
Nadim, 30, had reportedly asked for a transfer in July, telling the BBC that she did not feel at home in England.
"I've never felt home either in Manchester or City. I have made it clear to the management that I want out, and this is something I've felt for a long time," Nadim was quoted as saying by the BBC.
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"It is a fantastic club in many ways, but not for me."
Nadim, who fled war-torn Afghanistan as a 12-year-old, took refuge in Denmark before starting to play soccer.
Her talent was rewarded with a call-up to the national squad and she made her debut in 2009. She was part of the team that reached the Women's European championships final last year.
The Netherlands beat Denmark 4-2 for the title.
Nadim, who played for Portland Thorns in the United States before moving to City, will be a free agent on Jan. 1.
(Reporting by Shrivathsa Sridhar in Bengaluru; Editing by Martyn Herman)
