The trades will give the Rockets $3.5 million in cap space, which a source said they will use in an attempt to sign players who have been bought out.
The Nets also waived guard Marcus Thornton, acquired Wednesday in their trade with Washington.
McDaniels, who's 6-foot-6, 205 pounds, just couldn't get into coach Mike D'Antoni's rotation and played 212 minutes in 29 games. At the start of the season, D'Antoni wanted McDaniels to become a wing defender, but he struggled and fell behind Corey Brewer and Sam Dekker at small forward off the bench.
McDaniels said at the time he understood the business of the NBA, and despite limited playing time, his goal is "to remain ready."
In the summer of 2015, McDaniels signed a three-year, $10 million contract as a restricted free agent with the Rockets. The objective was for McDaniels to get significant playing time, but that never occurred.