The 23-year-old Bermuda international joined the MLS team in December 2011, brought on board by then director of player development Paul Mariner.
He went on to make 66 appearances in all competitions for Toronto, registering five goals and four assists.
At his best, Lambe offered some cut and thrust from the flank. But he was more miss than hit, ultimately falling down the midfield ladder in a roster featuring Michael Bradley, Dwayne De Rosario, Jonathan Osorio, Alvaro Rey, Kyle Bekker and Brazil's Jackson.
Ultimately he was released to make Toronto's salary numbers work. He was one of the 20 players whose pay counted against the salary cap. He was not eligible for the supplemental roster — players occupying roster spots 21-30 who do not count against the cap.
Lambe's salary was listed at US$70,000 last season.
"Enjoyed my time at Toronto sad to leave the club wish the lads the best this season," Lambe tweeted.
Lambe also spent time with England's Ipswich Town and Bristol Rovers.
He has played 12 times for Bermuda with four goals.
Lambe was part of Toronto's 2012 Amway Canadian Championship winner, scoring the winning goal against the Vancouver Whitecaps in the second leg of the final.