The 25-year-old Guildford had already said he would be joining Clermont Auvergne at the conclusion of his Super Rugby commitments with the Canterbury Crusaders.
Guildford, however, has not featured this season for the seven-times champions and had been reduced to playing club rugby in Christchurch and his home town of Napier.
Coach Todd Blackadder had said fitness issues were the reasons behind his slipping down the pecking order at the Crusaders.
Guildford, however, has battled alcohol issues off the field, which resulted in him receiving treatment and admitting in early 2013 he was an alcoholic.
The NZRU said at the time that strict conditions had been imposed on Guildford though they could not realistically force him to abstain from alcohol.
"We're really disappointed that Zac has not be able to achieve his full potential in New Zealand. He is a good man, talented but troubled," NZRU general manager rugby Neil Sorensen said in a statement on Thursday.
"Zac has struggled to continue to meet the commitments he made to himself to keep on top of his personal issues.
"Ultimately those issues are private to Zac but all parties agree that cutting ties now is the sensible decision."
Guildford had played two seasons with the Wellington Hurricanes before he transferred to the Crusaders in 2010.
He played 79 games in his six-season Super Rugby career but had not appeared for the Crusaders this year.
He made the All Blacks in 2009 and won 10 caps, including one against Canada during the 2011 World Cup where he scored four tires.
The Crusaders, who lead the New Zealand conference on 37 points, will not replace Guildford in their squad.
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