The midfielder joined the Reds in July 2007 and played an important role in helping Sir Alex's men seal a Premier League and Champions League double in his first season.
But injuries have blighted his careeer since, so much so that he has only made 39 appearances in his four years at the club.
Sir Alex confirmed Hargreaves will bid farewell to the Reds and wished him all the best for the future.
"This has been a difficult decision knowing how hard the lad has worked to win back his fitness," said the manager.
"But we have made it in the hope he will be able to resurrect his career elsewhere."