The 36 year old will not be offered new contract – and will now be a target for clubs in China and the USA eager to hand the former England captain one last lucrative swansong.
Chinese club Shanghai Shenhua are willing to pay the 36 year old some £20 million a year.
Terry, whose one year contract runs out at the end of this campaign, and Chelsea jointly announced the decision on Monday.
The Chelsea skipper, at the club since he was 14, said: “After 22 years there is so much to say and so many people to thank.
John Terry has offers from China and America after confirming his Chelsea exit John Terry transfer odds: Where will Chelsea legend play next season? Mon, April 17, 2017
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John Terry has struggled for game time under Antonio Conte
"I will decide on my future in due course, but for now I am committed to helping the team achieve success this season.
"The club and I have always had a fantastic relationship, which will continue beyond my playing days. We had positive talks but I have decided it’s the right time for me to leave. I feel that the end of this season is the right time.
“I feel I still have plenty to offer on the pitch but understand that opportunities at Chelsea will be limited. I will be looking to continue with a new challenge.”
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Terry helped Chelsea to 14 major trophies in his career, including the Champions League and four Premier League titles, and has made only ten appearances this season under Antonio Conte.
An offer is on the table for Terry, currently taking his coaching badges, to return to Chelsea in a non-playing role in the future – but he wants to play.
John Terry will be aiming to bow out with a fifth Premier League title
It is the of an era at Chelsea, with the departure of a player who has made 713 appearances since his debut in 1998, scoring 66 goals. Terry is the club’s third highest all-time appearance-maker and captained Chelsea a record 578 times.
Chelsea director Marina Granovskaia said: "Everyone at Chelsea would like to place on record our thanks to John for all he has done.
"He has been an outstanding player and inspirational captain.
"In that time, Chelsea has grown into one of the world’s top clubs and it is only right that John’s contribution is recognised. We look forward to welcoming him back in the future."
Terry will want to bow out on a high with Chelsea currently four points clear of Tottenham in the race for the Premier League title.