But the 24-year-old hasn't put pen to paper on a deal with anyone else just yet and he doesn't intend to make any rash calls as he continues to weigh up his options.
The man voted RBS Player of the Championship at this year's Six Nations plans to finalise his decision after Christmas, with a whole host of clubs thought to be vying for his signature.
"I've just told the Dragons I'll be moving on. I'm just focusing on getting fit and I'll make my decision in the New Year," Lydiate told BBC Sport after he was voted runner-up to Olympic taekwondo gold medalist Jade Jones in the public poll for the BBC Cymru Wales Sports Personality of the Year Award.
"I've been there (The Dragons) seven seasons now, I need a change. I want to push myself a bit further, I just want a new challenge.
"It was a massive decision, it wasn't one that was done on the spur of the moment, it was done over some time.
"It's just time for a change for me."
Lydiate is currently recovering from the fractured ankle that ruled him out of Wales' autumn defeats to Argentina, Samoa, New Zealand and Australia.
He hopes to return in time to play some part in the defence of Wales' Six Nations crown next spring, with a place on the Lions' summer tour of Australia potentially on the horizon if he can find the form that has made him one of Europe's most wanted men.