The former Aston Villa and West Ham midfielder had been on a short-term deal at Portman Road, but the club had offered him the chance to stay until the end of the season.
But Reo-Coker rejected Ipswich's offer and he has now become a free agent.
Reo-Coker was included in the squad for Saturday's game at Cardiff but he did not travel after talks with Town boss Mick McCarthy.
"Nigel is not staying. Fair play to him, he came in suited and booted yesterday and ready to travel but he wants a longer term contract," said McCarthy.
"I understand that. I think he may have some other offers. He's been great but if he not going to stay then there was no point in him travelling."
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