The defender, who was in his third spell with the SSE Airtricity Premier Division club, has left Turner's Cross at the beginning of the season
Murphy had originally agreed to extend his stay on Leeside for the 2014 season in December 2013 but will now depart.
The 31-year-old was in his third spell at Turner's Cross after rejoining the club from Shamrock Rovers in December 2010. A statement on the official Cork City website thanked Murphy for his service to the club.
The statement read: "Everyone at the club would like to thank Danny for his many years of service to the club, and wish him the best of luck for the future."
The London-born defender began his professional career with Queens Park Rangers and has enjoyed spells at Swindon Town, Margate, as well as spending time in Scotland with Motherwell and Dunfermline.
Murphy was part of the Cork City team that won the Premier Division in 2005 and also won the Setanta Sports Cup with the club in 2008.
After winning the Premier Division title with Shamrock Rovers in 2010, the defender returned to Cork where he helped the club return to the Irish top flight in 2011.