The 20-year-old joined the Heed last summer, following his release by Sky Bet League Two side Plymouth Argyle.
He made his debut in September’s 1-0 win at Forest Green Rovers - a result which took the Tynesiders second in the table.
Allen then started in each of Gateshead’s next three outings, but has not figured since a narrow defeat to Macclesfield Town in October.
Manager Neil Aspin empathised with the youngster, and is hopeful he will get his career back on track in his native South West.
He said: “River came in during the summer, and he hasn’t really featured. Recently, he has had injury problems with his back.
“We had a chat, and felt it was in the best interests of both parties if his contract was terminated.
“His home is near Plymouth, and I feel for him, because it’s difficult to come to another area and not play any games.
“For him, it’s best to go down there and try and resurrect his career closer to home.”