The safety's agent, David Canter, first announced the news via Twitter.
Gregory started in 13 games last season. He showed promise before injuring his thumb in Week 9 of the 2013 season, after coming off a subpar first season with the Patriots. Rookie third-round draft pick Duron Harmon filled in during Gregory's absence.
The move will save the Patriots approximately $2.85 million on the 2013 salary cap.
The 31-year-old Gregory was entering the final season of a three-year deal after spending his first six seasons with the San Diego Chargers.
Pro Football Focus ranked Gregory their 25th safety, grading him eight spots ahead of Harmon.