Gloucestershire have not re-signed Chris Taylor because of a clause in his contract relating the redevelopment of the County Ground.
The county were denied planning permission for extensive work on their Nevil Road home in January and that means the 35-year-old is free to move on, chief executive Tom Richardson said.
"We agreed and signed a conditional contract with Chris Taylor which was dependent on our ground development plan going ahead," said Richardson.
"Unfortunately, the planning permission we sought was turned down last month and we have, therefore, not been able to complete this agreement.
"We would like to thank Chris very much for his years of service as both player and more recently fielding coach and wish him all the best for the future."
A statement from Gloucestershire added: "His release is now the subject of litigation and the club will make no further comment."
Taylor, who has worked as a fielding coach in the England set-up, made his Gloucestershire debut in 2000 and scored 9,083 first-class runs in 160 four-day games for the county.