The 24-year-old made a big-money move to Boothferry Park a year ago after impressing while on loan.
However, since then he has struggled to settle in, and hasn't justified the £150,000 fee City paid to Oldham for him.
He only played in around half of City's games last season, and Jan Molby has since signed Shaun Smith from Crewe to replace him at left back.
Despite paying out so much for him last summer and the fact he still has two years to run on his contract, it is not thought City would seek a transfer fee. He joins Matt Wicks, Nicky Mohan and Lee Philpott on the free transfer list.