The Austrlia international, who was the first overseas player to make 500 Premier League appearances, was told that his current deal would not be extended with a guarantee of playing first-team football.
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The veteran made 219 appearances during five seasons at Craven Cottage, having joined from Middlesbrough on a free transfer in 2008.
Schwarzer had said that he would not decide his future until after Australia's crucial World Cup 2014 qualifier against Iraq in June, which the Socceroos won to reach their third successive finals.
Hull City are among the clubs reportedly interested in taking him on as he seeks a new source of first-team football.
Schwarzer is joined on the list of players released by the Cottagers by defender Chris Baird, Greek midfielder Giorgos Karagounis and former Wales international Simon Davies.
Development squad players Alex Smith, James Musa, Richard Peniket, Tom Donegan and Corey Gameiro have also been shown the door.