McDyess indicated at the end of last season that his playing days were over, but the Spurs didn't rule out his return after the lockout ended. The move clears $2.6 million from the team payroll.
The 37-year-old spent the last two seasons in San Antonio. He was drafted second overall by Denver in 1995 and also played in Phoenix, Detroit and New York.
McDyess averaged 12 points and 7.5 rebounds in his career. He was an All-Star in 2001 and played on the 2000 Olympic team.