The 49-year-old only moved to the Super Lig outfit in September last year after being sacked by Manchester City.
The move is at odds with Mancini's public comments earlier this week, in which he claimed he was to stay in Turkey despite acknowledging that he missed his home country of Italy.
In the interview with Gazzetta dello Sport, Mancini said: "I am under contract for a further two years and I've done well so far.
"Besides, we will play in the Champions League next season."
But a brief statement on Galatasaray's website confirmed the news on Wednesday, adding that the decision was by "mutual agreement".
Mancini has been strongly linked with a return to the Serie A in recent times.
The Italian guided Manchester City to their first Premier League title in 2012 and counts Fiorentina, Lazio and Inter as former clubs he has managed.
Galatasaray won the Turkish Cup last term while they finished second in the league, nine points behind arch-rivals Fenerbahce.
