Gerard Pique says Barcelona are prepared to lose Xavi in the summer as reports link the midfielder with a move to Qatar.
The club initially suspended the Spaniard as they investigated comments he made in a conversation with someone masquerading as an agent, which was subsequently broadcast online.
A statement on Wednesday night read: "Rangers announced today that the club has decided to terminate its contract with Francisco Sandaza. The player has been advised of the situation."
Sandaza revealed details of his salary and thoughts on his future during the conversation with someone pretending to sound him out over a potential move to Major League Soccer.
The statement continued: "Francisco spoke at length to someone posing as an agent and engaged in a conversation which the club believes to be a material breach of his contract of employment.
"The player was suspended but after careful consideration and a hearing with Francisco and his representatives, the club, and our advisors, believe that dismissal is the appropriate course of action.
"The termination is subject to the right of appeal under SFL rules and there will be no further comment from Rangers on this issue."