The 18 year old, a second year scholar, will try and forge a career in his homeland.
Says academy director Tony Carr:
"He had a bereavement in Italy prior to Christmas and went home early.
"He has decided he misses home now too much and wants to be near his family, and a decision has been made mutually that we would cancel his contract and honour his wish.
"The lad has left the club with our very best wishes and he is now in Italy looking to resurrect his career with an Italian club; we wish him all the best with that.
"I don't want to go into too much detail, but it was a tragic and very unexpected death and it has hit the family, including Manny, very badly.
"We must respect that he wanted to be with his family in Italy and not come back to the UK anymore."
Despite Manny's return, Tony feels the two years Manny spent at the Hammers has been of benefit to both club and player, and he explains:
"It has been a great experience for both sides; for him to try and adapt to the English game and for us to know his quirks and different style of play.
"We have enjoyed having him here, he has been a real star for us, and hopefully he would have had a very bright future.
"But we have to respect his decision, draw a line under Manny, and start again."
Tony insists that the club will still bring youngsters in from the continent where appropriate and adds:
"That wouldn't put us off having youngsters from abroad, but obviously when you do recruit from another country it does bring all sorts of different problems, similar to the senior side.
"It is a question of language and culture, but with younger players they are going to be a bit more homesick, missing mum and dad more than adults would.
"But it certainly wouldn't put us off the experience and if we have an opportunity to sign a player from abroad for West Ham in future who would be a good addition to the football club we would certainly take him."
Manny, who hails from the south of Italy, was originally recommended to the club by Paolo Di Canio's agent.