The 20-year-old striker was transferred from Kilmarnock for a fee of about £150,000 in January 2015.
He was sent out on loan at the start of the season by previous manager Jackie McNamara but has not played under Mixu Paatelainen since his December return.
United said in an official statement that they and Muirhead had now "parted company by mutual consent".
Muirhead scored twice in 22 games for Kilmarnock last season and hit the net twice in 13 outings after moving to United.
This season, the Scotland Under-19 cap failed to score in his three outings for the Tannadice club and only found the net twice in eight games on loan to Partick Thistle - both in the same game against Kilmarnock.
United sit eight points behind Kilmarnock at the bottom of the Scottish Premiership with only four games remaining and chairman Stephen Thompson and Paatelainen have promised a shake-up of the club's staff at the end of the season, whichever division they are in.
United could be relegated if Kilmarnock beat Hamilton Academical on Saturday and then the Terrors lose to Dundee.
But defender Mark Durnan insists that Paatelainen's squad still have plenty of spirit ahead of Monday's derby at Dens Park.
"There's a determination because people have to fight for their careers," said the 23-year-old.
"We know we've got a big game on Monday and we are trying to focus on that match.
"There's still four games to go - we are not mathematically relegated.
"Obviously it's not in our hands, but we have to win four games and then rely on other folk."
Durnan, who signed from Championship club Queen of the South, struggled to control his emotions as he contemplated returning there after one season at Tannadice.
"It would obviously be disappointing to come to a big club like this and to see it get relegated," he said.
"I made the step up to test myself, but this season just hasn't been good enough. It's difficult when you know where you are and what position you are in.
"I'm living, I'm breathing, I'm healthy, so I wouldn't say I'm down, but I'm disappointed with the position we are in in football."
Robbie Muirhead has left Dundee United after only 11 appearances for the club facing relegation from the Premiership.