Joseph, 35, has spent the last nine seasons with the Texans. He appeared in 14 regular-season games last season, recording 51 total tackles, one interception and 13 passes defensed.
"Johnathan has been a consummate professional, team captain and one of the leaders of our defense for the past nine years," the Texans said in a statement Wednesday. "It is rare for a player to sustain such a high level of play for over a decade and that says so much about him and his dedication to the game.
"He is an exceptional teammate, mentor, husband and father. His impact on and off the field makes him quite possibly the most celebrated free agent signing in franchise history. The entire Houston Texans organization thanks Johnathan for the contributions he made to our team and the Houston community. We wish him and his family all the best as he pursues free agency."
After the Texans' playoff loss to the Kansas City Chiefs in the divisional round last season, Joseph said he wasn't considering retirement.
The Cincinnati Bengals selected Joseph, a two-time Pro Bowl selection, in the first round of the 2006 NFL Draft out of South Carolina. In 200 career games between the Bengals and Texans, he has recorded 754 total tackles, 31 interceptions, 195 passes defensed and seven defensive touchdowns.