General manager Doug Whaley said Kolb received the "failed physical" designation with his release.
Kolb, 29, suffered a season-ending concussion last preseason, which put the future of his playing career in doubt. Kolb was due a $1 million roster bonus Thursday, which the Bills avoid paying by releasing him.
In total, the Bills will save $3 million against their salary cap by releasing Kolb.
Kolb joined the Bills last April and began training camp competing with then-rookie EJ Manuel for the starting job. Without Kolb, the Bills turned to Thad Lewis as their top backup to Manuel. It's unclear if Lewis will continue in that role next season.