The 31-year-old Norwegian international joined Rovers from Tromso in August 2004 after being signed by former manager Graeme Souness for a fee in the region of £2m.
Pedersen blossomed into one of the Premier League’s most consistent performers on the left side of midfield, popping up with some spectacular strikes – including a famous brace in the 2-1 win over Manchester United at Old Trafford in September 2005 – as well as countless assists.
The set-piece specialist would go on to make 349 appearances in a Rovers shirt, scoring 48 goals.
Rovers boss Gary Bowyer paid special tribute to the popular midfielder, saying: “Morten has been a truly great servant to this club over the past nine years. His loyalty, professionalism and dedication were second to none.
“He was low maintenance, he never caused us any problems and he was always available for selection, so he was a great role model for the younger lads.
“He goes with our very best wishes for the future.”
After bidding a fond farewell to players and staff at Ewood Park, Morten said: “This club has been a part of my life for nine years and I have given everything.
“There have been some good times and some bad times, but I think the fans and the club will have more good memories of me than bad.
"I want to play football – that is the main reason for me leaving. Of course it has been tough the last couple of years. I've always shown my love for the club and for the fans. I've made friends for life.”