Since signing a five-year, $37.5 million deal after being named the defensive player of the year in 2007, the oft-injured Sanders played in only nine regular-season games for the Colts.
Sanders played in just one game last season, leaving the Colts' opener on the team's first defensive series with a torn left biceps.
With safety Antoine Bethea signing a four-year, $27 million contract last summer; Melvin Bullitt, Sanders' backup, emerging as a competent starter; and the Colts still trying to sign four-time league MVP Peyton Manning to a new long-term deal, there wasn't enough room to keep Sanders.
Sanders has 373 tackles, 3½ sacks, two forced fumbles, three recoveries and six interceptions in seven NFL seasons.
Information from The Associated Press was used in this report.