Fabbrini's contract was due to expire this summer however the club have agreed to mutually terminate his deal early.
The 28-year-old has a deal in place to sign for Romania side FC Botosani as a free agent.
Fabbrini was told by Garry Monk told that he was not in his plans for this season and he has been seeking a club to get fixed up with.
In total Fabbrini played 28 games for Blues and failed to score.
In a statement on the club's website Birmingham said, "The Club would like to thank Diego for his service and wish him all the best for the future".
September 3, 2018