O'Connor, who was released from his Australian Rugby Union contract earlier this month for repeated disciplinary breaches, had been in talks with his former Super Rugby club Western Force about a possible return after he was dumped by the Melbourne Rebels at the end of the season.
However, the 23-year-old said on Wednesday he was off to pastures new.
"I have decided that I will be moving overseas next month as part of a short-term playing contract," O'Connor said in a statement published on News Ltd websites.
"I am in final discussions with several clubs and will announce the new partnership in coming days."
Two years out from the World Cup, Wallabies coach Ewen McKenzie has little time to find the right formula on the field and has his hands full trying to rejuvenate a team that has struggled with injuries and are short on confidence after a poor Rugby Championship campaign.
O'Connor's decision to leave Australian rugby behind is likely to rule him out of selection for the Wallabies next season, despite hopes the wayward talent might be rehabilitated.
The ARU only allows players who commit to provincial rugby at home to be picked for national duty, though the governing body has previously finessed that rule.
O'Connor said the move would help him be "the best rugby player and person" he could be and his management were continuing discussions with Western Force about a "longer term partnership."
"Both (Force coach) Michael Foley and (RugbyWA CEO) Mark Sinderberry have been great supporters of mine and I greatly appreciate it."
The richly gifted 23-year-old was the starting fly-half during the British and Irish Lions series and has won 44 caps for Australia since his 2008 debut.
He was cut adrift by the ARU earlier this month after being escorted by police out of Perth airport in the aftermath of a test match against Argentina.
That followed a string of off-field lapses that angered senior Wallabies during the Lions tour and alienated potential suitors among other Australian Super Rugby clubs after he was released by the Rebels at the end of the season.
O'Connor was widely pilloried for describing himself as a "brand" as well as demanding "key performance indicators" be fulfilled during fruitless negotiations with the Force over a new contract in 2011 before crossing to the Rebels.
The Force said the club had set "non-negotiable standards and values" in a clear reference to O'Connor's off-field problems, but a spokeswoman later said negotiations had ceased amicably.
"James has made the decision that is right for him at this point in his playing career and the club remains open to recommencing these discussions again in the future if James wishes to return to Australian rugby," the Force said.
After being released by the ARU, O'Connor had said he remained "focused" on earning his place back in the Wallabies side.
"I want to apologise for any issues that I have caused and I want express my respect for my team mates, the Wallabies and the jumper," he said. "There is nothing more important and rewarding to me than representing my country."