Armitage has already agreed terms on a two-year deal at the French club, where he will link up with Jonny Wilkinson.
Armitage's contract with London Irish ran until 2012 and the Premiership club had insisted he would not be released unless they could find a suitable replacement.
The Exiles announced their decision on Friday night in a brief statement which read: "London Irish confirmed today that it has agreed to release Steffon Armitage from his contract with immediate effect.
"The club wishes him all the very best for the future."
London Irish have been accused of making an "illegal approach" for Leeds flanker Hendre Fourie, prompting the Yorkshire club to submit an official complaint.
Fourie, who made his international debut this this season, would fit the bill as a suitable replacement for London Irish given he is higher up the England pecking order than Armitage.
But relegation-threatened Leeds claim the Exiles have been guilty of unsettling Fourie, who is still under contract at Headingley until the summer of 2012.
Leeds chief executive Gary Hetherington said: "We allege unprofessional conduct in that (player agent) James Adams contacted London Irish and negotiated a lucrative contract for Fourie in the weeks leading up to the end of the league season in full knowledge that the player was under contract.
"Also that London Irish negotiated a lucrative contract with the players' agent and, thereby, unsettling him and inducing him to break his contract with Leeds Carnegie."
Armitage has won five England caps but last played a full international against Italy in the 2010 Six Nations.
The 25-year-old will be putting international ambitions on hold by moving to the south of France, where he spent time living as a schoolboy.
The Rugby Football Union have made it clear to all players who move abroad this summer that they will not be eligible for England selection from the start of 2012.
Wilkinson has already decided to sign a new deal with Toulon while James Haskell, whose current deal with Stade Francais ends this summer, is weighing up his options.
Armitage spent five years at London Irish after moving from Saracens to play alongside his brother Delon, who has also been linked with a move to France.
Toulon president and owner Mourad Boudjellal originally announced the deal for Armitage in April.
Coach Phillippe Saint-Andre said at the time: "He's a very fast player and very powerful, given his size and his weight. He can also play at centre and he speaks French."
Gilbert has released a new line of rugby cleats. The Gilbert Virtuo 8S is part of the exciting new product. Check it out.
The entire All Blacks apparel line has been updated for 2013/14. Check out the New Zealand All Blacks polo.
The Nike Tiempo is a solid rugby cleat and one of few styles still made from full-grain natural leather.
The Gilbert Blitz 8S rugby cleat is a great cleat at a great price of $69.99. Get a new pair of cleats today.
A cool looking all black rugby cleat with the high performance adidas is known for. Get in the Gear!
Wear the crest of the British and Irish Lions on your t-shirt. A great look for the summer.
The All Blacks Performance t-shirt is black with hints of blue from the training jersey. Very Cool.
The New Zealand All Blacks training jersey for 2013/14. Get in the Gear!
The USA Rugby Pro Alternate rugby jersey is perfect for any fan of the Eagles. Get yours to wear during the summer Test matches.
The NEW All Blacks 2013/14 jersey has arrived at World Rugby Shop. Dare to wear the colors of the All Blacks.