The Ligue 1 side announced on Saturday that they had agreed a deal in principle to sign the 27-year-old, who recently had an unsuccessful stint on loan at Hull City.
Newcastle have now cleared the way for Ben Arfa to move on, five years after his arrival at St James' Park from Olympique de Marseille.
A statement read: "Newcastle United can confirm that Hatem Ben Arfa and the club have reached an agreement to terminate the contract between both parties with immediate effect by mutual consent.
"Newcastle United wishes Hatem all the best for his future."
Ben Arfa joined Newcastle on a season-long loan from Marseille in August 2010 before making the move permanent in the following transfer window.
The winger offered moments of brilliance during his time with Newcastle, but also came in for criticism over a perceived lack of application.
After falling out of favour under manager Alan Pardew, who moved to Crystal Palace earlier this week, Ben Arfa was offered a chance to resurrect his Premier League career with a temporary switch to Hull at the beginning of September.
However, he failed to impress Steve Bruce and was soon dropped, with the Hull boss telling BBC Radio Humberside: "Talent without hard work means you won't live up to your potential."
Nice are poised to complete the signing of Ben Arfa on Monday, subject to a successful medical.
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