The move was expected after Bautista batted just .203 and set a franchise record with 170 strikeouts this season. He hit 23 homers and drove in 65 runs while making $18 million.
The option for 2018 was worth $17 million. Instead, the Blue Jays will pay the $500,000 buyout for a player who spent nine-plus seasons with the club and was a six-time All-Star.
"Based on the construction of our roster, we feel it's unlikely that he's a part of the solution moving forward," general manager Ross Atkins said at a press conference.
Bautista hit 288 homers during his Blue Jays' tenure and led the majors with 54 in 2010 and 43 in 2011.
Bautista is highly popular in Toronto and fans showered him with applause in the final home game of the 2017 campaign. So Atkins declined to rule out a return at some point.
"Jose's career, it's remarkable, and the last home game of the season speaks to what he's meant to this city and this organization," Atkins said. "We wanted to make sure that when he comes back here he's going to be celebrated in a very strong way. That could be in the form of wearing a Toronto Blue Jays uniform again, it could be that he's traded for or signed in the future at some point, but there will be a day that we make sure we celebrate him in a significant way, knowing that he's going to be celebrated for years by the fans for his accomplishments."