In his first news conference in Denver since the rift developed more than a month ago, McDaniels said it became clear the Broncos had no choice but to grant Cutler his trade request.
McDaniels said Orton will compete with Chris Simms for the starting job in Denver. He also didn't rule out taking a quarterback in the draft.
The relationship between McDaniels and Cutler began to crumble when the 32-year-old rookie coach talked to other teams about trading the rocket-armed quarterback who turns 26 later this month. Cutler and his agent, Bus Cook, didn't think McDaniels was up front with them about the discussions and the distrust reached a level where Cutler requested a trade.
McDaniels balked at first, saying he wanted to repair the relationship. But Cutler never returned his calls, and McDaniels realized the two sides weren't working toward the same goal.
"We got to a point where it was made very clear to us that we were not going to be able to get to a resolution where Jay Cutler could be on our football team," McDaniels said.
However, McDaniels said he doesn't have any regrets.
"It could have worked out," he insisted. "As I mentioned a week ago, it was going to require a two-way commitment."
In a statement addressed to Broncos fans, owner Pat Bowlen said he and McDaniels "represented ourselves to Jay with honesty and integrity."
"I assure you both Josh and I made repeated attempts to reach out to Jay, and I can not speak for him as to why he chose to limit his response," Bowlen wrote, according to The Denver Post. "Ultimately, given his unwillingness to speak with either of us directly in the last 12 days -- at the same time his agent clearly stating to us Jay's intentions -- it became very apparent to me personally that he no longer wanted to play for the Denver Broncos. As such, we elected to trade him.
"Understand this: it remains about team," Bowlen continued. "Our franchise has gone to the Super Bowl six times, with three different coaches and with many different players. It has never been about one player, and it never will be. Coach McDaniels shares this vision, and everyone in the organization -- players, coaches and staff -- must understand and accept this unconditionally. If anyone does not, that person will not be a part of this franchise."
The drama with Cutler began to unfold when Denver flirted with trying to acquire Matt Cassel, McDaniels' star pupil in New England. Cassel was traded to Kansas City instead, but feathers were already ruffled.
"I don't know where the blame lies, or if there is blame," McDaniels said. "Obviously, it was a situation where communication became an issue. At that point, it started to get progressively worse. But, I understand the player's mindset. I understand that he wasn't happy with what had happened or transpired."
Information from The Associated Press was used in this report.