The former England international, who turned 36 on Tuesday, is out of contract in the summer and he will not be offered an extension. It will bring an end to his 10-year spell at the Reebok Stadium, which has seen him make over 400 appearances and score 84 goals.
"Kevin Davies is and always will be a Wanderers legend," manager Dougie Freedman told the club's official website. "I want to be fair to him as regards his future, as he deserves it. This decision means that he is now free to sort himself out with a new club in plenty of time for next season."
He added: "Being the type of man Kevin is, we sat down and had a chat about the future. He wants to carry on playing, and playing regularly. He has that desire to continue and this is the best move for him.
"I would like to thank him for his complete support and utter professionalism since I arrived.
"He never gives anything less than 100 per cent in training, or when called on for first-team duties.
"He will continue to be available for selection for the remaining games of the season."
Source: PA
Source: PA