Allen played just five games last season as he struggled to recover from a right knee injury.
His $4.9 million salary for 2016 would have been guaranteed if he was on the roster Wednesday.
He was placed on injured reserve with a designation to return after suffering a torn MCL in the first quarter of the Raiders' Week 1 loss to the Cincinnati Bengals.
He finished his only season in Oakland with one interception, two passes defensed and 11 tackles.
Allen, 28, played the first five seasons of his career with the Philadelphia Eagles. He had his best season in 2014, when he intercepted a team-high four passes and recovered three fumbles.
The Associated Press contributed to this report.