I would like to wish @Jcollison31 the very best of luck at Peterborough. He's one of the nicest men in football. Good luck Jack. dg— David Gold (@davidgold) May 29, 2015
Collison, who was on the books of the Hammers from 2005 to 2014, moved to Ipswich Town on a short-term deal in September of last year, but he failed to make a competitive appearance for the Championship club.
In fact, the Wales international midfielder has not featured in a competitive game since May 2014 because of a knee injury.
The 26-year-old will now hope to kickstart his career and get regular playing time at Peterborough next season.
Peterborough finished ninth in the League One table in the 2014-15 campaign with 63 points from 46 matches, six points behind sixth-placed Chesterfield.
Meanwhile, West Ham ended up 12th in the Premier League with 47 points from 38 matches.