McDonald put pen to paper on the long-term deal in April and at the time was hailed as a 'prolific striker with a big future' by Posh chairman Darragh MacAnthony.
The 18-year-old is currently on loan at Histon and is now expected to join the Skrill North side permanently.
Earlier this season McDonald saw a loan spell at Conference club Chester City ended after he was sent off in his debut.
McDonald joined Peterborough in late 2012 from non-league side Chasetown and was prolific for the club's youth and development teams.
He becomes the second Posh youngster to depart London Road in the space of week after Jevani Brown also left by mutual consent.
- Sports & Recreation