The 31-year-old, who moved to Eastlands on a free transfer last summer after his injury-ridden spell at Manchester United, only made one Premier League appearance for Roberto Mancini’s side, although he scored a free-kick on his debut in a 2-0 Carling Cup win over Birmingham City.
The Canada-born former Bayern Munich midfielder made four appearances in total for City. He has 42 caps for England, the last of which came in 2008.
Israeli international Gai Assulin was also released by the club after two seasons in the development squad.
The 21-year-old former Barcelona B winger did not make any first-team appearances, having joined from the Spanish side in 2010.
He spent part of this season on-loan at Brighton and Hove Albion, making seven Championship appearances without scoring.
Two further reserve-team players were also allowed to leave Eastlands, with Ahmed Benali and Sean Tse not offered new contracts.
Former England U17 midfielder Benali, 20, made two substitute appearances on loan at Rochdale this year, while Ireland youth defender Tse, 19, spent his two seasons as a pro in the reserves.