The 33-year-old, who joined the Championship club from Hull City last summer, had 10 months to run on his contract at Portman Road.
However, following conversations with the midfielder, manager Paul Jewell has admitted that Bullard did not feature in his plans for the coming season.
"I've known Jimmy for a long time. He's a top lad but he wants to play regular football and I can't guarantee him that here," Jewell told the club's official website. "We sat down and had a straightforward chat and I explained to him that I've got to look to the future and that he was down the pecking order in terms of a starting place.
"Jimmy loves playing football and at his age, he needs to be playing so all parties agreed that it was best if he moved on.
"He's a great character to have around the place and I'm sure there will be plenty of interest in him. We wish him all the best for the future."
Bullard made 37 appearances for the Tractor Boys.