The 34-year-old former Stoke full-back has had his contract terminated by mutual consent at Bramall Lane and manager David Weir had only kind words for the departing player.
"Danny is a model professional and we wish him the best of luck in his new challenge at Chester," the former Rangers captain told the club's official website.
Higginbotham made 15 appearances for the Blades after signing on January 1, having had notable spells with Derby, Southampton and Stoke.
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