The Super League club said he had been let go "to allow him to pursue another opportunity", but they have first option to re-sign the 23-year-old if he wants to resume his rugby league career.
A post on O'Neill's Instagram account read: "It’s official!!! Jacques has hung his boots up for love and is entering the Love Island villa. #Love #LoveIsland"
In a statement, O'Neill's former club said: "Castleford Tigers can confirm that the club has agreed to release Jacques O'Neill from his contract to allow him to pursue another opportunity."
"The Tigers have the first option to sign O'Neill back next year should he wish to return to rugby league."
"Known for a fearless attitude on the field by Castleford supporters, the Cumbria-born 23-year-old is a proud product of the Tigers' youth system, having come through both our scholarship and academy programmes before making his Super League debut.
"Castleford Tigers would like to wish Jacques well with his new opportunity and thank him for his efforts as a Tiger so far."
It has been reported that O'Neill is the ex-partner of Gemma Owen, the daughter of former Liverpool striker Michael Owen, who is already a Love Island contestant.
O'Neill, who made his Super League debut for the Tigers in March 2019, had been hoping to regain a regular starting place after hamstring surgery before putting his playing career on hold.