The 26-year-old wing-back has been transferred to English League One side Exeter City, who are managed by former Hibs assistant manager Gary Caldwell, with the terms of the deal remaining undisclosed.
Mitchell joined Hibs from Blackpool in January last year on a two-and-a-half year deal but the former Hearts player made only 10 appearances in total for the Leith club, scoring two goals.
An ankle injury kept him sidelined for much of his time at Easter Road and he has been unable to force his way into Lee Johnson’s first team plans. He featured just three times this season and has not played since being taken off after 39 minutes in the 2-0 defeat to Ross County at Easter Road in November.
“This is a good move for Demi as it gives him the opportunity to play regular football again,” explained Hibs boss Johnson. “We’d like to thank him for his hard work and wish him all the best for the future.”
Speaking about reuniting with the player, Exeter boss Caldwell told the club's website: "He is someone that we have chased all January and is someone I know well having worked with him individually and with Hibs as well so that’s a massive signing for the club.
"He is an energetic player with real pace and is very versatile, he can play anywhere up the left side and can even play in a front three. He is a great character and will fit into the good group of boys we have here already.
"He’s been training fully with the Hibs squad for a while now and is a physically fit guy in great shape so it’s a case of getting him up to speed and on the pitch.
"He’s a dynamic player that has played in the league above and in Scotland. He’s the type of signing we want at this football club, someone who is ready to go and impact the league straight away."
Mithcell added: “I’ve come here to play games, help the team as much as possible and help us finish as high as possible in the league, so I’m looking forward to getting going.
"The gaffer is a big pull to get me here as I know what he’s about and it was a positive experience with him before so it was a big pull."
Mitchell becomes the sixth player to depart Hibs during the January transfer window with Kevin Nisbet and Ryan Porteous likely to increase that number to eight in the coming days. Porteous is closing in on a £500,000 move to Watford while Nisbet is nearing a £2.3million switch to Millwall.