Newcastle have only two roster places available for 2027, and salary-cap limits have prevented the Knights from using one to keep Tyson Frizell.
The club confirmed at a fan event at McDonald Jones Stadium on Monday that the forward will leave before the 2027 season.
The Newcastle Herald reported earlier this year that the Knights were considering moving a player on to retain Frizell, who had become important to the club.
Frizell played in the first grand final of his career on Sunday evening and will seek another club for the 2027 season.
He has been strongly linked with the Wests Tigers, but no agreement has emerged. An unnamed Sydney club has also reportedly shown interest.
His form this season was solid, and Newcastle have options to cover his departure. Cody Hopwood is expected to join Jacob Saifiti in the starting side.
Hopwood impressed in the grand final, while Saifiti missed several late-season games through suspension. Saifiti can play for Fiji at the Rugby League World Cup.
The Knights also have middle forwards in their system, including Trey Mooney, who joined the club this season.