In a statement following a report on 1 News, the Super Rugby club confirmed Spencer would leave the club immediately, as the 0-2 Hurricanes return to training on Tuesday for Sunday's match against the Chiefs in Hamilton.
"Due to the financial uncertainty created by Covid-19, we have agreed he will finish his contract early," the Hurricanes said.
"This means he will not be part of the Hurricanes coaching team for the remainder of Investec Super Rugby Aotearoa.
"We would like to thank Carlos for his significant contribution to the Hurricanes and wish him all the best for the future."
Spencer joined the Hurricanes staff under John Plumtree at the start of 2019 after a stint with Sanix Blues in Japan.
He remained as attack coach under Jason Holland this season after Plumtree took on the All Blacks assistant job, with another former All Black Cory Jane also on the Hurricanes staff as defence coach.
1 News reported Spencer would not be replaced but experienced utility back James Marshall, who is out with a season-ending injury, may step up into an unofficial coaching role.
Spencer, 44, emerged from Hurricanes country, starring for Horowhenua-Kapiti while still at Levin's Waiopehu College and going onto a glittering career for Auckland and the Blues.
The first five-eighth played 35 All Blacks tests from 1997-2004 and had coaching stints in South Africa with the Lions, Sharks and Eastern Province before moving to Japan then Wellington.