The club paid Howard a $10 million buyout instead of picking up the option, which was worth $23 million.
He tied for the club lead in 2016 with 25 home runs, but also hit a career-worst .196.
Howard, who turns 37 on Nov. 19, has played all 13 of his major league seasons in Philadelphia. He was named the National League MVP in 2006 when he set career bests in home runs (58), RBIs (149) and batting average (.313).
The slugging first baseman helped the Phillies win the World Series in 2008, when he hit three home runs and had six RBIs in Philadelphia's five-game victory over the Tampa Bay Rays. He was named the 2009 National League Championship Series MVP in the Phillies' five-game victory over the Los Angeles Dodgers after batting .333 with two home runs and eight RBIs in the series.
His 382 home runs rank second on the Phillies' all-time list, behind Hall of Famer Mike Schmidt, while his 1,294 RBIs rank third.
When he was honored in a ceremony during the Phillies' final regular-season game this season, Howard said he planned to continue playing.
"I know there's more in the tank,'' he said. "I'll know when it's time.''
The Phillies on Thursday also declined the 2017 option on right-hander Charlie Morton.
Morton started four games in his only season with the Phillies before tearing a hamstring. His mutual option called for $9.5 million, and instead he receives a $1 million buyout.