Bly was acquired from the Detroit Lions on March 2, 2007, to replace Darrent Williams, the rising 24-year-old cornerback who had been killed in a drive-by shooting two months earlier.
In his two years in Denver, Bly recorded 134 tackles, one sack and seven interceptions, including 77 stops and two picks last season.
Bly was due to count $6.8 million against next season's $123 million salary cap.
On Monday, the Broncos released high-priced defensive tackle Dewayne Robertson, who had a $16 million cap number, along with linebacker Jamie Winborn, safety Marquand Manuel, special teamer Niko Koutouvides, defensive end John Engelberger and tight end Nate Jackson.
Bly, Winborn, Robertson and Manuel all started last season for Denver's defense, which surrendered 448 points and finished at or near the bottom of the NFL in every major category.
Bly's agent, Kennard McGuire, declined to comment when reached by The Associated Press on Tuesday night.
Copyright 2009 by The Associated Press