The League One club have agreed to terminate the 34-year-old striker's deal, 12 months before it was due to expire.
Lowe, who has been linked with a move to Tranmere Rovers, has said that he wants to be closer to his family in Liverpool.
"I had a long think over the summer and after speaking with my family and Karl [Robinson], I felt it would be for the best if I left," he told the club's official website.
"Constantly being away from my young family in Liverpool last season proved more challenging than I originally thought and I found it hard to concentrate fully on my football.
"I really enjoyed my short, but memorable time in Milton Keynes and I wish the boys every success next season."
Lowe scored 12 goals in 51 games for MK Dons.