Toivonen, a Sweden international, had become a fans' favourite since signing with the Victory in 2018, scoring 25 goals from his 40 appearances in navy blue.
But with the growing uncertainty in the world due to COVID-19, the 33-year-old felt "the time was right" to return home.
"I've really enjoyed my time at Melbourne Victory," Toivonen said in a statement released by the club.
"Given everything that is happening in the world, and in the league at the moment, we believe now is the right time for us to move back to Europe.
"Melbourne is a fantastic city and Victory is a very professional and well-run club. While we didn't achieve the success we had all hoped for over the past two years, it was a privilege to captain the club this season.
"I want to thank the members and fans who create such a special atmosphere to play in front of, both at home and away games, and I have really enjoyed scoring goals and celebrating with you after our wins.
"Finally, I want to thank my teammates and everyone that works at the club, all the football staff, the administration staff and the Board. I hope the club is back challenging for titles next season."
Victory's football operations manager, Paul Trimboli, praised Toivonen for his contribution to the club, wishing him the best of luck on his return home.
"On behalf of everyone at Melbourne Victory, we would like to wish Ola and his family all the best for their move home to Europe," Trimboli said.
"We understand Ola's decision to return home now and we thank him for his service and professionalism over the past two seasons.
"Ola is a world-class striker, and he's not only kept our members and fans entertained through his skill and finishing but it's also been great for our young players to watch and learn from a player of his calibre."