The 32-year-old, who looks set to represent Iceland at Euro 2016 next summer, has signed a two-year contract at the Scandinavian club and leaves South Yorkshire after three years of success.
Boss Steve Evans, who brought Arnason to the club, told the club’s official website: “My first thoughts are to thank Kari Arnason for the loyalty, performances and dare I say it friendship he has given me over the last three years since I convinced him to join the Millers from Aberdeen.
“The big fella will always have a place in the hearts of the Millers faithful, after playing such a huge part in the success this football club has enjoyed over the last three seasons.
“Malmo FF have made a fantastic offer and in return they are getting, in my opinion, a fantastic player.
“The opportunity for Kari Arnason to return to the country where he was born, a country in which his closest family members reside, perhaps made it more appealing to him than even a move to the likes of a big Premier League club.
“The lad will always be welcome back here, and on behalf of everyone at Rotherham United FC I would like to wish Kari every success at both Malmo FF, and with Iceland who are in the latter stages of a campaign to be part of the European Championships.
“As a manager I am obviously disappointed to lose a player of his quality, but sometimes even in this crazy world of football things are meant to be.”
Arnason joined the Millers in the summer of 2012 and was a key performer in the club’s rise from League 2 to Championship safety last term.
He told Malmo’s official website: “I want to play for Malmo FF because it is the biggest club in Scandinavia right now and when the opportunity came, I was very happy.
“I have played against Malmo FF and remember the fans were loud and gave great support to the team.”