Ballack has been at Stamford Bridge since 2006, but the London club were unwilling to offer the German the two-year contract he was reportedly seeking.
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"I've known for a while that the negotiations had stopped and it's time to move on. I have to find a new club and carry on with my career.
"Chelsea was always my first choice as I had four great years at the club and enjoyed every minute, but it was not to be. It's still my first choice, even now, but it was not up to me. The decision was down to Roman."
Ballack insisted his career at the highest level was far from over, and the former Bayer Munich man revealed he could return to his homeland.
"To end my career like this is not an option," Ballack added. "I want to play for at least two more years at the highest level so I can play for Germany at the European Championship.
"I've played in three Euros and two World Cups so know how special they are and can't end like this. I'm even more determined to carry on since I've been injured and the motivation is growing inside me every single day.
"I'm not yet ready to 'retire' by going to the United States or Dubai and want to stay in Europe. I'm a proud German who always enjoyed living there, so have some options back home."
Germany coach Joachim Low gave his backing to Ballack.
"I am certain that Ballack will play two or three more years at the top level so he will certainly not be thinking of ending his career," said Low. "He has lots of opportunities, and he told me this in Sicily.
"He even has some concrete offers from different clubs in different leagues.
"I think when you see what condition he was in recent months for Chelsea then it is clear he will play at the highest level for two to three more years."
Joe Cole and Juliano Belletti will also leave Stamford Bridge this summer, but Cole, who has been linked with a move to Tottenham, plans to put all talk over his future on hold until after England's World Cup campaign.
He said: "I'm just focused on the World Cup at the moment, I'll leave that sort of thing to my agent.
"My future will sort itself out. It's been going on a while. It's a story to be told another day."