Toulon have revealed that financial constraints and probable international commitments underpin their refusal to offer Gavin Henson a new contract.
Henson, who joined the Top 14 club in February, recently served a one-week suspension for a nightclub brawl with team-mates.
The 29-year-old was waiting to discover whether he would be welcomed back next season, but Toulon have dashed his hopes of returning to the Cote d'Azur.
Reports in France this morning suggested that Henson had paid the price for the run-in with his team-mates, which was sparked by critical comments he made of Jonny Wilkinson.
Club president Mourad Boudjellal told the French newspaper Var-Matin: "We do not want blame anyone, but for next season we hope that team spirit is a priority."
However, team manager Tom Whitford has stated that financial restrictions in place at Toulon and Henson's likely involvement in this autumn's World Cup have resulted in his departure.
"The problem is we haven't qualified for Europe this season," Whitford told BBC Sport Wales.
"That means our budget is going to be restricted, which means we're slightly limited in our salary budget - that's one reason.
"The second reason is we hope from his point of view he's going to be picked for the World Cup to play for Wales.
"That means that we're going to lose a player for a three to four month period, so we'd rather not take that risk.
"Obviously there was an incident - and he wasn't the only one at fault.
"Having taken everything into account we've come to a decision whereby we're going to release Gavin and we're going to wish him very well in the future."
Henson joined Toulon for an initial five months to cover for the injured Clement Marienval, hoping to convince head coach Philippe Saint-Andre to give him a new two-year deal as well as revive his Wales career ahead of the World Cup.
He last played for his country in the 2009 RBS 6 Nations before a combination of personal problems and injuries prompted him to take unpaid leave from the Ospreys.
After some reality television appearances, he signed with Saracens to end an 18-month period out of the game but made only four appearances and just one start in four months at the club.
The 29-year-old was initially hampered by a hamstring injury on his arrival in France, but made a try-scoring debut against Stade Francais and made his second start in another victory over Toulouse.
The decision not to keep Henson follows hot on the heels of the high-profile signing of former rugby league star Willie Mason, who is expected to play at centre.