The Gunners are currently restructuring and modernising the recruitment department as part of a move to a more data-driven model.
Rice has been connected to Arsenal for over 50 years as a player, coach and finally a scout - but the 71-year-old has been let go.
During his playing days at Arsenal Rice won the First Division and FA Cup, while he won multiple honours during his role as Arsene Wenger’s assistant.
He will still remain a part of the club, however Rice’s work will now centre around ambassadorial duties.
Rice is the latest scout to leave Arsenal with famed talent spotter Francis Cagigao also departing earlier this month.
The Spaniard is credited for unearthing the likes of Cesc Fabregas, but will not be part of the Gunners’ new setup.
Fellow scouts Peter Clark and former Reading manager Brian McDermott have also been let go.
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