"AEK announce the mutual termination of Eidur Gudjohnsen's contract. We wish him all the best in his future career," the club said in a brief statement.
The 33-year-old Iceland striker signed a two-year deal last year but his season was cut short last October by a broken leg.
The former Chelsea and Barcelona striker returned to action for the final three games of the season but AEK, who have serious financial problems, have opted to let the high-earning forward go ahead of the new season which kicks off on August 25.
According to local media reports, Gudjohnsen, who was a Champions League winner with Barcelona in 2009, agreed to a settlement of 200,000 euros in order to help AEK with their budget issues, with the club saving 1.2 million euro that would have covered the remainder of his contract.
AEK could yet be demoted by the Professional Sports Commission (EEA) if they fail to settle debts with the Greek tax authorities by August 10.