Henry, 30, who skippered Town to the Skrill Premier title this term, had been stalling over the deal as revealed in last week’s News/Gazette.
But he has now made a decision not to renew, ending his Town career, which saw him make 87 appearances.
Boss John Still said: “We made him an offer, he’s not accepted, so we’ll move on.
“That’s the offer, we thought it was the right offer, but obviously he doesn’t.”
It appears the value of the offer was the sticking point for Henry though, as Still continued: “From our point of view, we made the right offer and left it with him. He’s decided perhaps it’s not the offer he wanted, but it’s the offer I felt and the club felt is the right offer.
“You put a value to something, and that value was what the offer was, we’re not prepared to change it.”
For the full story, see the Luton News/Dunstable Gazette on sale now, while for all the latest Luton Town FC news, reports, stats, player profiles, live match updates, MOM poll, prediction table and a complete fixture list, visit our Hatters Microsite.