The central defender has made over 230 appearances for the Reds over eight years since initially joining them from the Danish club but says that "the time is right" to go back
The Danish team - with whom the centre-back learned his trade before making a £6 million switch to Anfield in 2006 - had announced previously that they were in talks over a return.
"Liverpool have been such a big part of my life that leaving is extremely difficult," Agger told Liverpool's official website.
"The opportunity arose for me to return home to Brondby and at this stage of my career it felt like the right decision for me.
"I wouldn't leave here to go anywhere else and that has been proven by my actions in recent seasons - I have turned down many offers to move to other Premier League and European clubs.
"I thank the Liverpool fans for the incredible backing they've given me in my time here. The club itself is very special and I shall remain a supporter for the rest of my life. I regard every game I played at Anfield as a privilege."
Manager Brendan Rodgers remarked: "We wish Daniel and his family well for the future. We've been discussing Daniel's future with him during the close-season and I know this is a decision he has reached after much soul-searching and deliberation.
"Daniel loves Liverpool and the club's supporters and has a unique connection with them. When we had the privilege to play Brondby in pre-season, we saw the esteem he is held in and I can understand why he would want to return there.
"On behalf of everyone at Liverpool, I thank Daniel for his service to the club and hope he finishes his career with some happy times in Denmark."