The young striker was rumoured to be likely to take this course of action regardless of The Irons sustaining their Premiership status.
However, the timing of his decision will be another bitter blow to The Irons, whose fans are still devastated at the end of their decade in the top flight.
"As much as I love West Ham United I feel that now is the right time for me to move on in my career," said Defoe.
"This is very much a career decision. I am very ambitious and hungry to achieve at the highest levels of the game for both club and country.
''The club staff and especially the fans are very dear to me and have been unbelievable in the early part of my career.
"It will always be a special place for me to play."
Defoe is viewed as one of the most promising strikers in England, and there will be no shortage of suitors for the prolific marksman.
Defoe has scored 11 goals this year, despite a terrible season for the club, and has been one of a handful of bright sparks in the past campaign.
It appears the 20-year-old's last meaningful action for the club will be his clever ball to the back post in the 2-2 draw against Birmingham, that allowed Paolo Di Canio to grab the equaliser.
Defoe started his career with Charlton, but moved to West Ham in the summer of 1999.
