But Olbermann, in a series of Twitter postings on Friday, fired back at his former bosses saying Current's statements were untrue and vowing to take legal action.
The outspoken liberal, who hosted a one-hour prime time show on Current, clashed with network executives earlier this year over coverage of the 2012 U.S. presidential election campaign.
Former U.S. vice president Al Gore and partner Joel Hyatt, who founded Current in 2005 as an alternative to corporate controlled media outlets, announced Olbermann's departure in an open letter.
"Current was ... founded on the values of respect, openness, collegiality and loyalty to our viewers. Unfortunately these values are no longer reflected in our relationship with Keith Olbermann and we have ended it," they said.
"Current has a fundamental obligation to deliver news programming with a progressive perspective that our viewers can count on being available daily - especially now, during the presidential election campaign," the letter added.
Olbermann joined Current in February 2011 after abruptly quitting his flagship program, also called "Countdown," on MSNBC a month earlier. He was appointed chief news officer, took an equity stake in the fledgling channel and became its biggest draw attracting an average audience of about 177,000.
A source familiar with the situation said Olbermann, who was reported to be earning about $50,000 per program, was terminated because he repeatedly failed to show up for work.
The source said he missed the key political nights of the Iowa caucus, the New Hampshire primary and the evening before Super Tuesday, which is one of the biggest primary election days in the race for the White House.
The TV channel accused him of disparaging Current TV and failing to promote the network.
But Olbermann claimed the network was in the wrong. On Twitter, he apologized to viewers and his staff for "the failure of Current TV" and said he had been trying to resolve his issues with Gore and Hyatt internally for more than a year.
"Instead of abiding by their promises and obligations and investing in a quality news program, (Gore and Hyatt) finally thought it was more economical to try to get out of my contract," Olbermann posted on Twitter.
"It goes almost without saying that the claims against me implied in Current's statement are untrue and will be proved so in the legal actions I will be filing against them presently," he tweeted.
Current said "Countdown" would be replaced by a new program hosted by former New York Governor Eliot Spitzer, starting on Friday called "Viewpoint with Eliot Spitzer".
Spitzer, who resigned as New York's top executive in 2008 in a prostitution scandal, hosted a current affairs show for CNN in 2011 that was canceled after less than a year.
He said in a statement he was "thrilled to have the opportunity to host a show on Current TV that will provide insight into and analysis of the critical issues on the minds of Americans today."
Current expressed confidence that Spitzer would deliver "critical information on a daily basis."
(Reporting By Jill Serjeant; editing by Bob Tourtellotte and Todd Eastham)