Hinsley, 28, has been with the Gladiators for six months after joining part-way through this season from North Ferriby, scoring a hat-trick on his debut.
He went on to score nine goals in 22 appearances.
Matlock boss Dave Frecklington said: "With the transfer deadline next Thursday the last thing I wanted to do was keep people after the deadline and if things don't work out, they've no club to go to.
“I spoke with Luke after Frickley put an offer in, I couldn't guarantee Luke games and looking at next year it was probably best for Luke to move on.
“I’ve nothing but praise for Luke, he's been excellent here in terms of his attitude and commitment and he's scored some important goals.
“With Jonny Margetts coming in and also Nyal Blake, we needed some pace and some quality to help the others up there. One had to go by the wayside, unfortunately it's Luke and we wish him all the best."