Coach Bo Ryan announced Dearring's departure on Monday.
The redshirt sophomore played 45 minutes over 18 career games. He was scoreless in three brief appearances this season.
Dearring was among the preseason candidates to earn more time in the backcourt behind starters Bronson Koenig and Zak Showalter. But freshman Khalil Iverson has been the only guard used off the bench lately.
Dearring said on Twitter that he cherished the time he spent at Wisconsin but needed to move forward.
The Badgers (6-5) next play Tuesday against Texas A&M-Corpus Christi.