With the move, the team bought out the remainder of Blatche's contract for $23 million and had his salary removed from the books.
Blatche, a once-promising second-round draft pick, played in just 26 games last season, averaging 8.5 points and 5.8 rebounds per game. In 2010-11, he averaged 16 points and eight rebounds per contest as the Wizards struggled to a 23-59 record.
"Andray did not figure into our future plans, and using the amnesty provision is a mutually beneficial opportunity for us to part ways," Wizards President Ernie Grunfeld said in a statement.
The 25-year-old ran into trouble off and on the court in recent years, including a suspension for fighting with a teammate at a night club, refusing to enter a game and belligerence toward the coaching staff.
Blatche was benched by Coach Randy Wittman last season to undergo conditioning after gaining weight.