Kilkenny has been an integral part of Glory's set-up since arriving in January 2018 following his high-profile falling out with then-Melbourne City coach Warren Joyce.
The 35-year-old featured for Glory in the first 18 games of this season, but he has been frozen out over the past week in wins over Melbourne Victory and Western United. Garcia revealed after Wednesday night's 3-0 win over Western United that Kilkenny has been informed that he won't be contracted beyond this season.
"Killa's a great individual player, but the team and the club are moving in one direction, and he's moving in another," Garcia said. "We spoke calmly about it. It was a good conversation. He's a good professional, and he'll continue to work hard this season.
"I feel like the guys who have come in have done well. It's got nothing to do with youth, it's got to do with performance. "We want to be moving towards growth as a group as well as a club. That's probably the biggest thing."
Glory's second win on the trot have lifted them back to within six points of sixth spot. Wednesday's win over Western United was a fiery affair, with 21-year-old Glory midfielder Callum Timmins getting under the skin of his more experienced opponents like Besart Berisha and Alessandro Diamanti.
Berisha got so angry that he felled Timmins in an off-the-ball shove in the second half before having a scuffle with Glory goalkeeper Liam Reddy. During the match, Diamanti had words with Garcia about Timmins not showing enough respect to opponents. Garcia didn't see anything wrong with Timmins' actions.
"I'm sure Timmins thinks he [Diamanti] is a great player. He can show his respect after the game and swap shirts," Garcia said. "But if you show your opponent too much respect, what's the point in playing? "He's a fantastic player, and he deserves respect. But once you cross that white line, it's 11 v 11. It doesn't matter who you are or how old you are or how young you are."
Western United coach Mark Rudan didn't see too much wrong with the second-half melee, but he's desperate to end his side's three-match losing run that has seen them slip three points adrift of sixth spot. United are back in action on Saturday against Sydney FC.
"It's like a Cup final for us," Rudan said.