His departure from Stamford Bridge will surprise many as he is expected to play an important role for England manager Fabio Capello in South Africa.
"We would like to thank him for his dedicated years of service and wish him well in his future career," read a Chelsea statement.
He struggled to hold down a starting berth in the Chelsea team during the 2009/10 season after returning from a serious knee injury last September.
Cole made 26 league appearances and scored two goals in the campaign - including a vital strike in the 2-1 victory over title rivals Manchester United in April.
Reports surfaced during the season that Cole's future was in doubt as contract negotiations over a new contract stalled, with suggestions that the player and his representatives angered Chelsea owner Roman Abramovich with their hard-line stance over wages.
Cole featured for England in the World Cup warm-up victory over Japan and scored in the 3-0 friendly victory over Platinum Stars on Monday.
Ballack and Cole will be high-profile departures from Stamford Bridge
He appeared in front of the media at an England press conference in South Africa on Wednesday and was reluctant to talk about the Chelsea situation.
"I am just focused on the World Cup," he said. "I'll leave that with my agent. I just want to get my head down and try and train and play well.
"My future will sort itself out. It won't distract me. It has been going on for a while and it is a story to be told at another time.
"I want to try and do my best for England over the next few weeks."
His availability will alert a number of Premier League clubs, with Arsenal, Manchester United, Liverpool and Manchester City all linked to the player.
Last week, Tottenham boss Harry Redknapp - who managed Cole at West Ham - told BBC Radio 5 live: "I've got a feeling he may have agreed a deal with somebody.
"I don't think it's going to be Tottenham that sign him but if he hasn't agreed a deal with somebody and he doesn't stay at Chelsea then we would be interested."
Cole played 282 times for Chelsea, scoring 39 goals, and won three Premier League titles and three FA Cups.
Ballack was set to captain Germany at the World Cup but was ruled out of the tournament with an ankle injury suffered in May's FA Cup final victory over Portsmouth.
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