Arsenal paid £72 million ($90m) to sign Pepê from French club Lille in 2019 but will get nothing for his departure, with the Ivory Coast international reportedly set to sign for Turkish side Trabzonspor.
Pepe had a good start at Arsenal under former manager Unai Emery but struggled to fit in after Mikel Arteta took over, and has not started a Premier League game since October 2021. He was sent to Nice on loan last season.
He had one year remaining on his contract, but Arsenal opted to let him go instead of using him as a backup to Bukayo Saka at the Emirates.
"Everyone at Arsenal thanks Nicolas for his contribution during his time with us and we wish him well for the future," the London club said in a statement.