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Peter Taylor had already decided Leite would not be offered another contract, preferring instead to have just two goalkeepers on the club's books.
The former Portugal Under-21 international was originally to join Hull City in 2004 but the move fell through. The deal was resurrected last summer, with the ex-Charlton reserve signing for one year.
His only first team appearance in a Tigers shirt came in the 2-1 League Cup defeat at Blackpool in August, and since then he has been alternated with Matt Duke as backup for Taylor's number 1, Boaz Myhill.
The 25-year-old is expected to look for a club in the Portuguese league when he is fit again.