The 36-year-old Garcia is 3-5 with a 5.77 ERA in 11 games with the Orioles. Garcia can either accept the demotion or declare himself a free agent.
Manager Buck Showalter says, "Freddy has a decision to make. He can stay with us and go to Triple-A or do something else. Hoping he stays."
Garcia was optioned because the Orioles recalled rookie right-hander Kevin Gausman from Norfolk on Monday.
Showalter said of Gausman: "Needed an arm today. We're short in the pen."
The 22-year-old Gausman is 0-3 with a 7.66 ERA in five starts with the Orioles this season. He pitched in relief during spring training.