Stoke announced on Friday that Palacios, long-serving defender Andy Wilkinson and goalkeeper Thomas Sorensen will leave the club when their contracts expire at the end of June.
Stoke signed Palacios from Tottenham for £6million in 2011, but he has started just 14 league games since.
The Honduran midfielder has been plagued by injury problems, most notably to his knee, during his time at the Britannia Stadium.
The club tried to sell the 30-year-old to Qatar Sport Club last summer, but he failed a medical and returned to Stoke, where he failed to make a first-team appearance last season.
Now he is looking for a new club.
Wilkinson, 30, has also been released by his boyhood club after making 194 appearances over 15 years.
Sorensen played 129 times for Stoke over a seven-year spell.
Nine of the Under-21s squad have also been released following the expiration of their contracts, whilst George Waring, Peter Skapetis, Joel Taylor and Mason Watkins-Clark have been offered new deals.
A Stoke statement read: "The club would like to thank those departing for their efforts and wish them all the best for the future."
Source : PA
Source: PA