Taylor, 23, has decided to move on for family reasons after the Rabbitohs had offered him a new deal to stay at the club. His departure now frees up salary cap space that could see them move for either Melbourne’s Cooper Cronk or Manly half Daly Cherry-Evans.
He said: “I have really enjoyed my time at the Rabbitohs.
“The Club, the players and fans have been very good to me. I came here wanting to become a better player, and I will be leaving here as a State of Origin player, a better person, and with another daughter in our young family.
“I appreciate the patience the Club has shown, allowing me to make the choice that was best for me.”
Taylor scored twice at the weekend as Souths beat Penrith 40-24, but hours later news of his move overshadowed their first victory of the season.
The Queensland State of Origin forward started his career at Brisbane, before moving to Souths for the 2010 season.