The 39-year-old has blamed a lack of game time as his decision to leave.
Iniesta has only made three substitute appearances in Kobe's 14 league appearances so far.
Vissel Kobe are top of the Japanese league.
Iniesta joined Kobe after leaving Barcelona in the summer of 2018.
He has made 133 appearances for Kobe so far, winning one Emperor's Cup and one Japanese Super Cup.
“I always thought I would retire here, but things haven’t gone as I wanted them to,” he told reporters.
“For the past few months I’ve trained hard with the intention of contributing to the team, but I started to feel that the coach had different priorities.
“That was my reality and I accepted it with respect. In the end, I decided in discussions with the club that the best decision was to leave, based on a combination of my competitive reality and the passion I felt for continuing to play.
“I have grown a lot as a person and as a professional while being surrounded by great friends at Vissel Kobe. Not only did I get to play football, but I also got to experience and savour this wonderful Japanese culture. I now have special feelings for a country that has welcomed my family so warmly.”
Iniesta famously scored the winning goal as Spain beat Netherlands 1-0 to lift the FIFA World Cup in 2010.
The La Masia academy graduate won four Champions League titles and nine La Liga trophies among numerous other honours while playing for Barcelona.