Centre-back Collins, who will be 35 in August, revealed on Wednesday that he would be departing the London Stadium when his contract expires on June 30.
And the club released a statement on Thursday to confirm that the former Wales international, who has made 214 appearances over two spells with the Irons, will be on his way.
Joint-Chairmen David Sullivan and David Gold said on the club's website: "We would like to place on record our sincere thanks for the outstanding service James has given West Ham United down the years.
"His bravery and commitment on the pitch were never called into question and he has played his part in establishing the Club in the Premier League since his return in 2012.
"We appreciate just how popular James is among our fellow supporters but, with the appointment of a new manager, we felt together that the time was right to go our separate ways.
"It goes without saying that we wish James and his family every success in the future and they will always be welcome at London Stadium."
Meanwhile, 37-year-old former France international, Evra, will also depart when his contract expires at the end of next month.
The former Manchester United left-back arrived on a short-term contract in February and made just five appearances in Claret and Blue.