Subotic, who was in the final season of his contract, joined Dortmund from Mainz in summer 2008.
The Serbian defender became an integral player under Jürgen Klopp and was part of the team that won back-to-back Bundesliga titles in 2011 and 2012, the 2012 DFB Cup and reached the final of the 2013 UEFA Champions League, where BVB lost 2-1 to Bayern Munich at Wembley Stadium.
*Danke Neven - for your sliding tackles, your cheers, your goals and the celebrations in the Kreuzviertel!
"We've had huge success in the almost ten years Neven has been with us and in terms of character he has been a great person to have within our ranks," said Dortmund CEO Hans-Joachim Watzke. "I would like to take this opportunity to thank him warmly on behalf of all Black & Yellows."
"Neven has come to represent a great and successful era for BVB," added Dortmund sporting director Michael Zorc. "He is a special and worthy player. Our doors in Dortmund will always remain open for him!"
Watch: Neven Subotic on his unbreakable bond with Borussia Dortmund
Subotic, 29, has been plagued by injury in recent years - making just 10 Bundesliga appearances in a Dortmund shirt since the start of the 2015/16 campaign - and spent the second half of last season on loan at Cologne.
"My time as part of the Dortmund family has come to an end," Subotic wrote on his Facebook page. "Together, we achieved great things that will stay with us forever. Now it's time for a new challenge [...] Dortmund fans will always have a place in my heart and I will never forget where I had the best time in my life."
Subotic made 263 appearances for Dortmund in all competitions.