Town have told Dean McDonald that he will not be offered a new deal when his current contract expires in the summer. McDonald, 20, signed a 12-month deal a year ago having been on a short-term contract towards the end of the previous season.
Boss Joe Royle told the club site: "I have spoken to Dean and told him we won't be offering him a new contract.
"We have a number of young strikers at the club now who are breaking through, the likes of Danny Haynes and Billy Clarke, with Darryl Knights in the wings as well.
"We are well covered in that area and it would be difficult for Dean to hold down a place in the side, and at his age he needs to be looking at playing first team football week-in, week-out.
"He's still contracted here until the summer and will stay in first team contention, but we will help him as much as we can to find a new club and wish him all the best in the future."
McDonald, a former Arsenal trainee, has made five starts and 10 sub appearance for the Blues, scoring one goal.
In January, Hartlepool United, with whom he spent a month on loan at the end of last year, tried to sign him permanently, offering the Blues £75,000, but this did not match Town's valuation of the player.