Pearce, a restricted free agent, reportedly received a three-year deal from the Dockers on Monday - the first official offer of free agency.
The Power, who had three days to match the offer, confirmed that they have allowed Pearce to leave on Wednesday.
"We have taken time to think about the situation and have resolved that it would be irresponsible in the context of our team structure at Port Adelaide to match the offer put forward by Fremantle," Power general manager of football Peter Rohde said.
"Danyle has made a strong contribution during his eight years at Port Adelaide and we wish him well with his new opportunity in the AFL."
Pearce played 154 games for the Power after debuting in 2005, earning the Rising Star Award in 2006.
He was part of Port's 2007 grand final team but his form has never reached the lofty standards set by his excellent efforts early in his career.Meanwhile, the Power confirmed they were still considering their position in regards to defender Troy Chaplin, who was offered a deal by Richmond on Monday afternoon.