The ex-England international penned a one-year deal at Villa Park last summer after bringing an end to his two-decade spell with Chelsea.
Terry fell just short of guiding the Villans back up to the top flight of English football, though, with Saturday's playoff final defeat to Fulham proving to be his final match.
Reports at the weekend suggested that the 37-year-old had said his goodbyes to manager Steve Bruce and the rest of Villa's squad at Wembley, and the West Midlands outfit have now confirmed his departure.
A club statement read: "Aston Villa can confirm the club will part company with John Terry. We would like to place on record our most sincere thanks for the effort and professionalism he showed with us last season.
"John is a true leader and was everything and more that we hoped. Hugely popular and influential in the dressing room, he played a real captain's role in creating the incredible bond the players shared with our supporters, and vice versa.
"We hope he looks back on his time with Villa fondly and we wish him the very best as his career moves forward."
Terry, who started 35 of Villa's 46 league games in 2017-18, has been tipped to see out his playing career in Major League Soccer or the Far East.