Bonds, who has been linked to the use of performance-enhancing drugs, thus faces the possibility that he is in the final days of his career.
"No one is more aware of what Barry has meant to the Giants and San Francisco than I am," said Peter Magowan, the club's president and managing general partner. "Barry helped make San Francisco become a baseball town again.
"However, all good things must come to an end."
Bonds surpassed Hank Aaron's career record of 755 home runs this year, and has pushed that mark to 762. He holds the major league record for walks (2,558), is tied for second all-time with 1,996 RBI and is third in runs scored (2,227).
"I was told by the Giants that they will not be bringing me back for the 2008 season," Bonds said in a statement. "Although I am disappointed, I've always said baseball is a business and I respect their decision."
Bonds will be free to sign with any team in the majors, although it is questionable whether he will be offered a contract.