Hessenthaler, 47, who has twice managed Gillingham, will now seek a return to football management, according to Scally.
The statement read: "After lengthy discussions over the past few days with Andy Hessenthaler, the club's director of football, and having refused him permission over the past few months in speaking to other clubs interested in employing him in coaching/management capacities, I have reluctantly agreed today to terminate his contract with the club forthwith to allow him to explore these opportunities, and return to football management.
"Andy has made a huge contribution to this football club over the past years, and played a major role in the club achieving the success of this season past, working tirelessly behind the scenes in assisting myself and the team management with a fantastic Championship winning promotion to League One.
"I have long been conscious of Andy's desire to return to the training ground in coaching or management capacities, areas in which he has had great success over the past few years, and I know I speak for everyone connected to Gillingham Football Club when I wish him every success in the future."
Hessenthaler made over 303 league appearances during his playing career with Gillingham.