"Now it's time for me to try a new adventure and from the bottom of my heart I want to thank you for our time together," he writes.
Nilsson came to Bielefeld from Elfsborg in 2019, when the club played in the German second division.
The 28-year-old was involved in bringing the club to the Bundesliga during his first season.
This season, however, was gloomy for Nilsson and Bielefeld who finished second last in the league and relegated.
A new club for Nilsson, who has made eleven international appearances, is not yet ready.