The Colombian joined the Greek giants last September from Qatari side Al-Rayyan but his return to European football has come to an abrupt end.
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Rodriguez made 23 appearances for the club, scoring five times and chipping in with six assists.
A club statement posted on Twitter read: "Olympiacos and James Rodriguez have decided to terminate their cooperation. James will always be part of our club and a member of the "red-and-white" family. We want to thank him for his service and we wish him every success in the future."
The attacking midfielder rose to superstardom at the 2014 World Cup in Brazil where he was one of the players of the tournament despite crashing out of the competition with Colombia in the quarter-finals.
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His displays earned him a move to Real Madrid during Carlo Ancelotti's first spell at the club before later following the Italian to Everton for a year-long spell.
Rodriguez took to social media to thank the club for his short time there.
"I would like to thank everyone for all the time that we have spent together," he tweeted.
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"Although we are going our separate ways, I feel that I will always be a member and welcomed in the family of the great port Piraeus. I wish all the best to Olympiacos and every success in the future."
Aged just 31, it remains to be seen where he plays his football next after a period of much change for the South American.
Rodriguez remains a key figure for Colombia, registering 26 goals in 90 caps.