Midfielder Kelly, 34, joined Mark Robins’ side in 2017 and has gone on to play 180 games across a seven-year spell.
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He played an integral part in their League Two promotion through the play-offs in 2018.
Two years later, he was then a part of Coventry‘s promotion to the Championship.
But the club have now confirmed his departure along with keeper Simon Moore, right-back Dermi Lusal and winger Bradley Stretton.
And while Robins paid tribute to the quartet, he took the time to specifically praise “club legend” Kelly for his contribution.
Speaking on the club website, he said: “I would like to thank those who are leaving for their time with us, the contributions that they have made to Coventry City, and wish them all of the best for their future careers.
“In particular, Liam Kelly will be rightly lauded as a club legend. He has been an impeccable professional on and off the field, and an integral part of Coventry City’s rise through the divisions in recent years.
“I would also like to thank Simon, Dermi and Bradley, and wish them the best of luck for the future.”
Ex-Bristol City, Oldham and Leyton Orient man Kelly was an unused substitute in Coventry’s thrilling FA Cup semi-final defeat to Manchester United last month.
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The Championship side came from 3-0 down to send the game to extra-time, only to lose on penalties.
They also had a goal disallowed for a marginal offside in the dying seconds of extra-time.
Coventry finished ninth in the Championship this season, nine points adrift of the play-off places.
It comes after they reached Wembley last season, only to lose to Luton on spot kicks.
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