"Following joint discussions, Paris Saint-Germain and Gianluigi Buffon have agreed to not renew the legendary goalkeeper's contract which expires on 30 June 2019," PSG said in a statement.
The 41-year-old goalkeeper, who won the World Cup in 2006 and is Italy's most-capped player with 176 appearances, did not say whether he would be retiring from the game after leaving the French capital.
He joined PSG last summer after ending a trophy-packed 17-year career at Italian giants Juventus and played 25 times in all competitions for PSG last season, winning the Ligue 1 title and the pre-season Champions Trophy.
"Today my adventure outside Italy comes to an end," Buffon said in a statement.
"Ernest Hemingway wrote that there are only two places in the world where people can live happily: at home and in Paris. Today onwards, this will also apply to me: Paris, in some way, will always remain my home."
This season's league title was the 10th of Buffon's career, adding to a bulging trophy cabinet that contains just about every honour in football.
However the Champions League has eluded him despite him spending the bulk of his career at Juve, one of Europe's biggest clubs, and it was hoped that he might break his duck with the Qatari-funded Parisians.
However despite winning the league at a canter, the past season was a poor one for both Buffon and a team with lofty ambitions on the European stage.
They missed out on both domestic cup competitions and most importantly were dumped out of the Champions League by Manchester United in embarrassing style, blowing a 2-0 first-leg lead to go out on away goals following a controversial last-gasp penalty.
Buffon made a crucial error that helped United achieve their remarkable comeback, spilling Marcus Rashford's weak shot into the path of Romelu Lukaku to allow the Belgian to score the away side's second and set up a dramatic finish.