The Buffalo (N.Y.) News reported the 30-year-old quarterback was contracted to get a $3 million dollar bonus Wednesday but the team did not want to pay it, and offered a restructured deal instead.
"In the end, we had to do what we feel is best for our football team and it was a very difficult decision," said Bills General Manager Buddy Nix. "Ryan did some great things as our starting quarterback. He is a class act, a terrific guy with a great family and has been involved in many charitable endeavors in our community. But difficult decisions often have to be made and so we are moving forward."
Nix said the team will focus on "adding another quarterback to our roster and we will continue to explore every option available to us."
The release of Fitzpatrick leaves the Bills with Tarvaris Jackson, who was third string last season, as the team's only experienced quarterback, the newspaper said.
Fitzpatrick signed with the Bills in 2009 as a backup to Trent Edwards, eventually become the starter. He signed a contract extension in 2011 reported to be worth $59 million over six years, with $24 million guaranteed.
Fitzpatrick -- who previously played for the Rams and Bengals after being drafted out of Harvard -- threw for 3,400 yards, 24 touchdowns and 16 interceptions in 16 games for the Bills last season.
In 73 career NFL appearances, he has thrown for 14,336 yards, 92 touchdowns and 81 interceptions.