The other teams have 48 hours to claim Ellis and take on the final two years of his four-year contract, which would be $22.9 million.
If Ellis clears waivers, which seems likely, he would become an unrestricted free agent. The Pacers would still be responsible for paying his $11.2 million salary next season, but his 2018-19 salary will no longer be on Indiana's salary cap for that season.
The 31-year-old Ellis, a 12-year veteran, was not part of the Pacers' plans to rebuild around a younger group of players.
Ellis' production and playing time decreased significantly the past two seasons. After averaging 18.9 points in his final season with the Dallas Mavericks in 2014-15, his average shrank to 13.8 points in 2015-16. This past season, he became a bench player, starting just 33 of the 74 games he played while averaging 8.5 points and 27.0 minutes per game.
The Indianapolis Star reported the Pacers and Ellis discussed the possibility of a buyout earlier this week, but those talks broke down.
Ellis would have been the third-highest paid player on the team at $11.2 million next season.