The 29-year-old defender, who made 316 appearances for the Minstermen and was integral to their return to the Football League, spent the entire 2014/15 campaign on loan at Vanarama Conference side Grimsby.
Parslow has not played for City since November 2013 and will leave when his current deal ends next month.
Chairman Jason McGill told the club’s offcial website: “On behalf of everyone at York City I would like to thank Daniel for the nine years of exceptional service he has given to the football club.
“He has experienced many ups and downs with the club, the highest being his involvement in the promotion winning season to the Football League in 2012.
“As well as his valuable on pitch contribution, Daniel has proved to be an exceptional individual off the field. He’s always given so much to our work in the community, especially the positive initiatives run with local schools and young people.
“Daniel has been a pleasure to have at the club and we wish him the very best for the future.”