Fellow Wolverines player Ricky Doyle also received his release to pursue a transfer, the school confirmed Tuesday.
Albrecht will be a graduate transfer and can play next season for another school.
A 5-foot-11 point guard, he played nine games this season before deciding to shut it down. He averaged 7.5 points and 3.9 assists a year ago when he was healthy.
Albrecht is best remembered for scoring 17 points in Michigan's loss to Louisville in the national title game in 2013.
"I just didn't feel like I was helping the team this year," Albrecht told ESPN. "I wasn't close to 100 percent, but now I feel great and want to find a good situation where I can play and help a team."
Albrecht said that he would have remained at Michigan for next season, but the Wolverines didn't have a scholarship available. Coach John Beilein returns starting point guard Derrick Walton and also a heralded freshman in Xavier Simpson.
Doyle, a 6-foot-9 forward who has two seasons of eligibility remaining, averaged 3.8 points and 12.2 minutes a game this season. He would probably have entered next season behind Mark Donnal and possibly Moritz Wagner on the depth chart.
The Associated Press contributed to this report.