Luai, who will play for the PNG Chiefs from 2028, was told last week by the Tigers he was free to explore his options, with cashed-up Parramatta the clear front-runners for his signature.
Eels coach Jason Ryles again reiterated on Saturday night that his club would be interested in signing Luai.
The decision to cut ties a year early represents an incredible U-turn from the Tigers, who were insistent Luai would still have a big role to play in helping the club end their long-running finals drought.
But three months on from Luai's decision to sign with the Chiefs, he has been shown the door with the Tigers' season in freefall.
"We love what Jarome has brought to this club both on and off the field which is the difficult part of this situation, but we need to look to the future," Tigers chief executive Shaun Mielekamp said on Saturday.
"Having Jarome's departure at the end of 2027 already confirmed, we needed to look closely at our roster and where we invest our resources with a longer-term view.
"We're in an industry where difficult calls need to be made at times and we feel this is in the best interests of the Wests Tigers moving forward."
When Luai inked a deal with PNG in April, coach Benji Marshall was keen to underline the five-eighth's importance for the remainder of 2026 and 2027.
But 10 games later, eight of which the Tigers have lost, their finals hopes are in disarray.
It mirrors a similar storyline to the 2025 season when their campaign was derailed by Lachlan Galvin's move to Canterbury.
The Tigers went going down 32-6 to the Warriors on Friday and Luai did not attend the post-game press conference, with a cranky Marshall reluctant to discuss the issue.
While Luai's exit undoubtedly makes the Tigers weaker next season, the joint venture now has a significant boost in salary cap space to strengthen their roster.
"We've got some great young halves here at the club and we need to provide them with the best chance to grow and develop as players, which means we need to give them opportunities to test themselves at NRL level," Marshall said.
"This agreement is testament to Jarome and his commitment to this group, that he's willing to step aside to ensure our club is in the best position possible over the next few years."
Beyond the Eels, Perth would also shape as another option to help kickstart the franchise in 2027 before moving to the Chiefs the following year.
But Parramatta would likely be in the box seat, given it would allow Luai to continue living in western Sydney before moving to PNG.
"I'll talk to the people I need to at the club and make a decision going forward," Ryles said after the Eels' 28-12 loss to the Sydney Roosters.
"We have a really clear strategy we are working towards.
"Anyone who is an elite player that becomes available that we think is going to help us into the future, we are very interested in."
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