The 31-year-old - who is under contract with the Catalan club until June 2014 - has spent his entire professional career at the Nou Camp, but in a statement released by his representatives, revealed the "irrevocable decision" not to pen a new deal.
On Wednesday, the Daily Mirror circulated rumours that Liverpool boss Brendan Rodgers wanted to bring Valdes to Anfield, with Manchester United's Spanish stopper David De Gea set to replace the Brazilian at Barca.
A statement released late last night from Valdes's principal agent Gines Carvajal to news agency Efe read: "The agents of Victor Valdes have communicated to Barcelona in a meeting held this afternoon the irrevocable decision of the player to not renew his contract."
The news will spark a raft of transfer speculation and increased interest in the Barcelona star's future, with Liverpool likely to be joined by numerous clubs across Europe declaring an interest in the goalkeeper's signature.
Valdes recently suggested he would consider a move to another league and country, and that opens up the possibility of a reunion with former Barcelona head coach Pep Guardiola at Bayern Munich.