Former star All Blacks playmaker Spencer has been cut loose midway through his second season at the Super Rugby franchise and won't be replaced.
A short Hurricane statement said financial uncertainty had forced them to make the difficult decision and wished Spencer well. It said there would be no further comment.
The 44-year-old, who played 44 Tests across 10 seasons, arrived in Wellington in late 2018 following coaching stints in South Africa and Japan.
The announcement comes less than a week after Highlanders assistant coach Mark Hammett announced he was seeing out his fourth and final season.
While Hammett didn't give a reason for his departure, it is widely believed to be prompted by a need to reduce costs.
Last week New Zealand Rugby chief executive Mark Robinson confirmed 40 of his 160 staff would be laid off.
That figure was less than first feared, with the resumption of Super Rugby Aotearoa in front of large crowds this month having eased the financial stress on the sport.