Knoche joined the club at the age of 13, rising through the ranks before making his first team debut in 2011.
The 28-year-old has featured regularly since then, but the was unable to agree a new contract with Die Wölfe.
Speaking to Sportbuzzer, Schmadtke confirmed the defender’s exit.
“We are totally grateful for what he has done for this club. But we will not continue with Robin. It was a difficult decision,” Schmadtke said.
The Coronavirus pandemic and its effects on Wolfsburg’s finances played a role in the decision.
Schmadtke added: “In a difficult phase for us, we made him an offer that was financially difficult for him.”
Knoche was called up by Joachim Löw for Germany in 2014, but wasn’t used against Spain.
Eintracht Frankfurt and Turkish side Fenerbahce have been linked with Knoche, who will be a free agent on July 1.