MacDougall has played 31 games for the Rabbitohs over the past three seasons, scoring five tries for a total of 20 points.
"The Club has decided to release Adam MacDougall from the remainder of his contract effective immediately, as we feel it is in the best interests of the Club and Adam," Rabbitohs' CEO Shane Richardson said.
"We are changing the culture of the Club and we have deemed that Adam doesn't fit into the culture we are trying to develop for the rest of the season and continuing into next year.
"This decision is supported by the Board, the management, the coaches and the senior players.
"We thank Adam for his contribution over the past three seasons and wish him the best of luck at the Knights next year."