Fornaroli joined City from Danubio in 2015 and won the Golden Boot in his first A-League campaign, before captaining the club to FFA Cup glory.
The 31 year-old has fallen out of favour under Warren Joyce this season, featuring in just four league matches.
The forward has reportedly agreed a deal to join Perth Glory next season and his departure from City has now been sealed.
"The club thanks Bruno for his contribution over the last three and a half years with Melbourne City and wishes him the best for the future," a statement read.
Fornaroli scored 57 goals in all competitions for the club.