Henry, the New Zealand Breakers swingman, and the Otago team had ''mutually agreed'' to part company, the franchise announced in a release.
Basketball Otago general manager Markham Brown said Henry approached the Nuggets late last year seeking to withdraw from the team due to a troublesome leg injury.
''We consulted with the Breakers medical team and management who confirmed Leon would likely require corrective surgery,'' Brown said.
With both the Breakers and Henry indicating the player was planning to withdraw, the Nuggets made the ''difficult decision'' to pursue other players.
On the back of some solid performances for the Breakers this season, Henry recently re-assessed his availability. Brown said Henry approached the Nuggets, saying the injury had improved and asking if a roster spot was still open.
''With the exception of our second import slot, our roster is now full so both parties have agreed not to proceed with the contract,'' Brown said.
''Leon appreciates we had to be proactive and complete our roster on the basis of his earlier desire to withdraw.''
Henry was playing for the Breakers last night. Before tip-off, he confirmed the parting from the Nuggets was amicable.
''I was still very keen to play for the Nuggets but this is a decision that I totally understand given the situation with my leg and the prospect of undergoing surgery in the off-season,'' Henry told the Otago Daily Times in an email.
''The Nuggets couldn't sit by during that time and not assemble as strong a roster as they could, and of course my return to fitness and change of plans have come a little too late for both of us.''
Henry, who played just six games for the Nuggets at the end of last season, averaging 12.8 points and 6.8 rebounds, said he wished the franchise all the best.
His absence will be unfortunate for the Nuggets but, with Mark Dickel back to lead a team including outstanding import Antoine Tisby, BJ Anthony, Brendon Polyblank and Hayden Allen, along with a core of locals and a second import, the franchise will still field a talented side.
There will now be interest in whether another New Zealand team takes a punt on Henry. No doubt the Nuggets will be hoping he does not come back to haunt them.
