The story was first reported by the Philly Voice.
Okafor will join Anthony Bennett (first overall pick in 2013) and Hasheem Thabeet (second overall pick in 2009) as other first-round picks in the top three that did not have their fourth-year options exercised.
No other third overall pick has had his fourth year declined.
Unless the 76ers are able to trade him, Okafor will become an unrestricted free agent in 2018. Sources told ESPN last week that the Sixers were working to deal Okafor because he had fallen out of the rotation. The frontcourt logjam of Joel Embiid, Ben Simmons and Dario Saric leaves Okafor expendable.
The team announced it picked up the third-year options for Simmons, Saric and Timothe Luwawu-Cabarrot, as well as the fourth-year option for Justin Anderson.
Okafor, 21, averaged 17.5 points and 7.0 rebounds per game his rookie season in 2015-16 and was named to the league's All-Rookie team. With his time reduced from 30 minutes per game to 22.7 last season, he slipped to 11.8 points and 4.8 rebounds per game. He was getting 22 minutes per game again this year and averaging only 10.0 points but 9.0 rebounds.
ESPN's Chris Haynes contributed to this report.