Coach Jack Del Rio told reporters that he "wanted more speed off the edge."
The release means the Jags will save a huge chunk of cash. Douglas, who signed a free agent deal in 2003 after years with Philadelphia, was slated to make $3.345 million this season.
His is the second major cut made by the Jaguars this summer. Fellow defensive end Tony Brackens, the team's all-time sack leader, was cut loose earlier this month.
"In Hugh's case, in particular, we thought it was time to move on," Del Rio said. "He's been a model citizen. We gave him every opportunity and continued our evaluation."
Douglas recorded only 3 1/2 sacks in 2003, a "down" year, he admitted.
"I got into a funk and I never got out of it until the end of the season," the former All-Pro said during the first week of training camp.