Pittsburgh could have paid a $1 million buyout but opted to retain the five-time All-Star, who has been the subject of trade rumors.
The 31-year-old McCutchen batted .279 with 28 homers and 88 RBIs last season. It marked the seventh straight season that he topped 20 homers.
However, McCutchen's batting average was below .300 for the third consecutive year. The 2013 National League MVP batted .314 better in three straight seasons (2012-14) before the decline.
The Pirates also declined options on catcher Chris Stewart ($1.5 million) and left-hander Wade LeBlanc ($1.25 million). Stewart received a $250,000 buyout and became a free agent while LeBlanc got $50,000 and was outrighted to Triple-A Indianapolis.