Bell based himself in Geraldton, 400km north of Perth, because of business interests, only training once a week with the club and playing games on weekends.
But Fremantle said the former skipper was moving back to Perth and looking forward to returning to Fremantle on a full-time capacity.
"He has advised that the move back to Perth is due to family reasons and this decision was made amicably by all parties concerned," the club said in a statement.
"Peter said he is looking forward to returning back to the football club in a full-time capacity."
Fremantle play bottom side Melbourne at the MCG on Sunday.
