Manager Declan Ryan informed the Mullinahone clubman, older brother of captain Eoin, of the news last week.
Kelly, 32, was a member of the senior panel since 1998 and in 36 championship appearances, he has scored 1-48.
Kelly, who won All-Star awards in 2002 and 2005, has struggled with injury in recent years but showed good form for University of Limerick in their Fitzgibbon Cup success this year.
He scored a goal against Waterford in March but was hauled off at half-time in the next outing against Offaly.
Kelly was part of last year’s All-Ireland winning squad but didn’t feature in any of Tipp’s six championship games after he sustained a broken ankle while playing for Mullinahone against Ballybacon/Grange 12 months ago.
Ryan, meanwhile, is tipped to add new talent to his panel ahead of Sunday’s final league outing of the group stages, against Wexford at Semple Stadium. Tipperary will train in Thurles this evening and local sources have indicated Carrick Davins forward Willie O’Dwyer is set for a call-up, along with Stephen Lillis (Thurles Sarsfields) and Paddy Murphy (Éire Óg Nenagh).
Shane Bourke, who scored 3-4 against Galway, needed two stitches in a hand injury sustained in a victory for JK Brackens against Drom & Inch in the Mid Tipperary championship.