Tuesday's move was expected after the 43-year-old struggled in May and lost his closer's role to rookie John Axford. Axford saved 24 of 27 chances.
Hoffman got his 600th save on Sept. 7 and finished the season with 10 to raise his total to 601. He had a 5.89 ERA this year.
Milwaukee also declined a $6.5 million option on left-hander Doug Davis and a $2.25 million option catcher Gregg Zaun, who both were injured for most of the season. Davis gets a $1 million buyout and Zaun $250,000.
Milwaukee claimed right-hander Justin James off waivers from Oakland.