The 31-year old Australian striker has had his contract mutually terminated after spending the past 18 months at The Den.
The former Celtic star has featured in 24 Championship matches for the Lions this term but has been told by manager Ian Holloway that he is not in his plans for the second half of the campaign.
McDonald, who joined Millwall from Middlesbrough in July 2013, said he was grateful for the London club for giving him a chance and was hopeful they could push clear of the relegation zone in the second half of the campaign.
"I'd like to thank everyone at Millwall and in particular the fans for all their support," he said in a club statement.
"I had some memorable moments here, not least scoring the winner at Charlton last season, which was certainly a good feeling.
"I would like to wish the manager and the lads the very best for the rest of the season and I'll certainly be hoping they can move up the table and stay in the Championship."
During his time with the Lions, McDonald scored six goals in 60 appearances in all competitions.
A report on Sky Sports suggests that the Australian international 'is now expected to move abroad'.
Millwall FC (@MillwallFC) January 23, 2015
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