Iwelumo scored twice for City in seven appearances during his month long stint and Johnson paid tribute to the contribution made by the former Colchester man, who made his last appearance in Saturday's 2-0 defeat to Reading.
Johnson told the club's official website: "We thank Chris for his time with us. There were a few factors. I had a chat with Mick (McCarthy) and I think a lot of it was down to the player.
"Chris worked so hard getting to the Premier League and I think he wants to be there for the final weeks of the season. He wants to be with his family and try and see if he can win a place in the first team at the top level."
Meanwhile, Nicky Maynard has been awarded the Goal of the Year accolade at the Football League Awards for his strike - a spectacular scissor-kick into the top corner - in the 2-1 defeat at QPR on Boxing Day.