The 38-year-old former England international will depart at the end of the season, Leicester said on Thursday.
The announcement came two days after Vardy took to social media to express his "anger and sadness" at a season he described as a "total embarrassment," with Leicester having been consigned to relegation with five matches to spare.
Vardy will go down as a Premier League great, having scored 143 goals — placing him No. 15 on the competition's all-time list — and once netted in a record 11 straight games in Leicester's improbable title-winning campaign. The team won the league at preseason odds of 5,000-1.
"Nine years ago, we did the impossible — we won the Premier League," Vardy said in a video message on Instagram in which he also recounted winning the FA Cup in 2021 and reaching the Champions League quarterfinals in 2017. "Those memories will last a lifetime."
Leicester chairman Aiyawatt Srivaddhanaprabha described Vardy, who joined from lower-league team Fleetwood Town for 1 million pounds (now $1.33 million) in 2012, as a "unique" and "special" player.
"He holds a place in the hearts of everyone connected to Leicester City, and he certainly has my deepest respect and affection," Aiyawatt said. "I am endlessly grateful for everything he has given to this football club."
Vardy has five games left for Leicester. His final home match will be on May 18 against Ipswich.
Leicester have just 18 points from 33 games and are in next-to-last place.
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