The defender has not made an appearance for the Championship side for the last two seasons.
Gary Rowett has admitted that it was a difficult decision to tell Mitch Hancox that he was going to be released by Birmingham this summer, but insisted that it was the right decision for everyone, the Birmingham Mail reports.
The 22-year-old's current contract at St Andrew's expires at the end of the season. But having not made a first-team appearance for the Blues in the last two seasons, Rowett confirmed that he would not be getting an extension before explaining how the tough call had to be made.
"We have let Mitch go, with a heavy heart in some ways," he told the Mail.
"I could have offered him a contract for next season then after five games Mitch is going to come in and be in the same position.
"Mitch needs to go and find himself and play 50 games.
"He actually agreed with that process."
The news will undoubtedly be a big blow to the young defender. He joined the club in 2001 and would go on to make over 30 league appearances since emerging into the first-team four years ago.
However, with the Midlands side hoping to build on their promising season which saw them spend much of the campaign around the play-off places in the division, Rowett perhaps feels that some ruthless decisions are needed to help the club take that next step.
Hancox's departure may free up some funds that can be spent on strengthening the squad to allow them to make another push for the top six, and should allow the full-back to find a club that is able to offer him the regular football that Birmingham could not.