Risdon, who was the expansion club's first Australian signing, captained United to their one and only championship in 2021-22, amid Alessandro Diamanti's injury.
The former Socceroos regular, who played at the 2018 World Cup, departs after 90 ALM games and four goals.
"My time here has been great and I've loved every minute of it," Risdon said.
"I've been here from the very start, and to see where this club has come in such a short space of time has been incredible.
"From playing at different venues, training out at Georgies at the start to finally being at our home in Tarneit, slowly everything's being built around us.
"Our first win over in Wellington, the grand final, being able to captain this club ... all those things will mean a lot.
"To be able to say I had a part in helping build what's going on here makes me very proud, and is one I'll be able to tell the grandkids."
Risdon scored one goal in 21 appearances this season.
"As a foundation player of the club, Josh has played a significant role in our journey both as a person and as a footballer, and we are extremely proud to have him as a leading figure in our club's history," football boss Mal Impiombato said.
"His commitment on the pitch has been matched by his personality off it, and I am sure he has had a positive impact on every single person that he has interacted with at our club.
"On behalf of our football department and our entire club, I want to sincerely thank Josh for his contributions to Western United."
Risdon has been linked to a return to home-town club Perth Glory, where he played 142 ALM games between 2010 and 2017.
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