There is little doubt the news will start a bidding war between the four other Australian franchises, but it is another blow to the 23-year-old all-rounder who is hoping to hold onto the Wallaby No 10 jersey for the Rugby Championship.
"I would like to acknowledge the role James has played in helping the Rebels gain traction in the very competitive sporting landscape in Melbourne. After three years in the Super 15 competition, the Club is entering the next phase of development," said Clarke.
"I'm very confident in our player recruitment strategies which continue to identify some excellent emerging talent. This group will provide the platform for continual improvement, both on and off the field.
"Our foundation Rebels Gareth Delve, Ged Robinson, along with retiring players Nic Henderson and Tim Davidson, will all depart the Club this year, leaving a lasting imprint on the Victorian Rugby community."
While the jury is still out on which position is the best for the multi-talented O'Connor to fill in the Wallaby back division, the player himself has no doubts. He loves being in the decision making role at outside half.
"I've said I want to play No 10, but I just want to be part of the team. I want to be on that field and I'll play wherever I can," admitted O'Connor.
"I would like to nut down a position, maybe No 10, maybe somewhere else. I can look myself in the mirror and say I gave my best shot for Australia."