Panesar made his Test debut for England in March 2006 against India in Nagpur.
He has taken 164 wickets at an average of 33.78 in his 48 Test appearances.
"I feel that Neil, along with a trusted support structure in place around me will help me put my personal and professional problems behind me and enable me to put all my energies and focus into the game and a new club."
Panesar, who has 48 Test caps, had two years remaining on his Sussex contract, but will become a free agent at the end of the season.
He became an instant cult hero in 2006 when India's Sachin Tendulkar became his first Test victim during his debut appearance in Nagpur and was an England regular for the next three years before Graeme Swann established himself as the team's first-choice spinner.
However, Panesar is determined to return to the England fold in time for the Ashes in Australia this winter.
Monty Panesar at Sussex
52 County Championship wickets at an average of 25.53
69 wickets at 27.24
53 wickets at 23.15
23 wickets at 40.39
Source: Cricinfo. Statistics correct at 19 August
"I want to give myself the best chance of playing all forms of the game at the highest level," he said.
"I am determined to do whatever it takes to gain selection for England this winter. I want to become the best I can be.
"I believe that if I maintain the bowling progress I have made in recent weeks which enabled me to be selected for the Test squad at Old Trafford, I can fulfil my long-held ambition of becoming the best spin bowler in the world, over time."
Sussex chief executive Zac Toumazi said he hoped Panesar would be able to re-establish himself by playing regularly elsewhere.
"Clearly this season has been a very difficult time for Monty. This will give him every opportunity to put his personal and professional life back on track," he added.
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