The Lakers have an interest in re-signing Hill during free agency, but the move was made at the moment to help add salary-cap space as the Lakers enter free agency in pursuit of several big-name players, sources said.
Hill was in a tight spot, as the Lakers face a logjam at the forward position with Julius Randle, Larry Nance Jr., Tarik Black and Ryan Kelly currently on their roster. There is also Ed Davis, who declined his $1.1 million player option for a longer, more lucrative deal.
After declining Hill's option, the Lakers will have about $23 million in spending power as they target several frontcourt players in free agency, including Portland's LaMarcus Aldridge, Memphis' Marc Gasol, the Clippers' DeAndre Jordan, Cleveland's Kevin Love and Detroit's Greg Monroe.
Hill was a bright spot in an otherwise dismal 2014-15 season for the Lakers.
His 12.0 points and 7.9 rebounds per game were easily career bests as he helped fill the void of the injured Randle at power forward. He also started 57 of the Lakers' 70 games -- before the season, he had started just 60 games total in eight seasons.
The 6-foot-10 Hill, the eighth overall pick in 2009 out of Arizona by the New York Knicks, had spent the past three seasons with the Lakers and indicated earlier this year that he'd like to stay.
"I want to be here," Hill said. "I want to be in a steady place I call home."