O'Connor made his Super Rugby debut at the age of 17 and quickly became a full international. With Beale he is likely to lead the attack against the British & Irish Lions when they embark on their 125th anniversary tour to Australia in 2013.
The versatile Wallabies back had appeared set to sign a new contract with the Perth-based Super Rugby Franchise despite interest from the other four Australian teams.
But the Force claimed O'Connnor missed a Wednesday morning deadline for the resolution of the deal following more than four months of contract negotiations and withdrew their offer.
Connor has already played his last match for the Force having picked up a one-match suspension for a dangerous tackle in last weekend's last-gasp defeat to the Reds.
"We presented James with extremely generous terms which reflected his talent and standing at the Emirates Western Force," said Force chief executive Vern Reid.
"We were fully committed to giving James every opportunity to continue his development through the rugby programme in Western Australia, however, it is clear his final decision has been based on other factors.
"We're still a young club and it is fundamental in our development that everyone is committed to building a cohesive culture that defines a 'team' ethos.
"The terms being imposed by James' management did not correlate with that objective."
"It is with a great deal of regret that we will farewell James, however, we can be certain that we did everything we could to retain his services and that our offer was fair and reasonable and in the best interests of the Emirates Western Force and rugby in WA."
O'Connor was pinpointed as a star of the future at an early age and made his senior debut for the Force back in 2008 at just 17-years-old. He has racked up 38 Super Rugby appearances for the Force and won his first Australia cap a year after his Force debut.
Force head coach Richard Graham echoed Reid's sentiments but while disappointed at the Wallaby's decision he remains confident over the franchise's future.
"We all know that James is a wonderfully-talented player. However, the terms that were being asked of us by his management were, in our view, unacceptable irrespective of the player in question," said Graham.
"We have a strong belief in our rugby programme and that is evidenced by the number of international-capped players being produced out of WA.
"James has been one of the beneficiaries of that programme and we were certain he could continue to grow within the environment we've created here.
"There will be plenty of conjecture about what James' departure means in terms of our future on the field and I can reassure our members and supporters that our goals do not change.
"We will continue to recruit exciting new players while our retention has already seen a high calibre of personnel remain committed to rugby in WA.
"We wish James the best in his future. However, our concern from now going forward is planning and preparing without him.
"We are confident we have a robust squad that will display the character to grow and find success in seasons ahead."