The 28-year-old back-rower, made 123 appearances for the club after coming through the academy ranks, but is now a free agent and is on the lookout for another club.
The writing was on the wall after he was sent out on loan to Ospreys for the whole of 2017/18, and coach Todd Blackadder says opportunities would again be limited in the forthcoming campaign.
Blackadder said: "We have an extremely deep and talented range of players in the back row and it was clear that time on the pitch would be limited.
"We'd like to thank Guy for the immense contribution he's made during his time with the club. Not only has he captained the team, he's been hugely influential passing on his experience to an exciting crop of talent coming through in his position."
Mercer added: "I have had an incredible time with Bath Rugby and want to thank the players, staff and friends of the club that have made that possible."