General manager Ted Thompson announced the move Wednesday after practice.
The Packers waived Bennett with the designation of failure to disclose a medical condition, setting up the team's case for a grievance to reclaim the $4.2 million in remaining prorated signing bonus money.
Bennett is now subject to waivers. The 31 other teams have until 4 p.m. ET Thursday to submit a claim. If Bennett is not claimed, he becomes a free agent and can sign with any team at any time.
Bennett's release comes hours after Packers coach Mike McCarthy ruled him out for this week because of a shoulder injury.
"I know he was in here yesterday. There's a number of opinions that he's working through; he met with our medical staff yesterday, so they're still going through the process, but he will be out against Chicago,'' McCarthy said before Wednesday's practice.
Bennett's agent, Kennard McGuire, declined comment.
The veteran tight end hasn't played since he announced during the Packers' bye week that he was "pretty sure" this would be his last NFL season. When Bennett returned from the bye, he offered only a one-word explanation -- "Life" -- for what led him to that decision.
It's unclear exactly how Bennett got hurt. He took part in the first practice after the Packers' bye week but hadn't been on the field since then.
The Packers (4-4) have only two other tight ends on their roster: Lance Kendricks and Richard Rodgers. Without Bennett on Monday night against Detroit, Kendricks had two catches for 32 yards and Rodgers one catch for 5 yards.
The Packers signed Bennett to a three-year, $21 million contract as a free agent in March. They gave him a $6.3 million signing bonus. If Bennett retires, the Packers would likely go after the remaining two-thirds of his signing bonus. If they do, Bennett would have to return $4.2 million. He also would leave up to $12.95 million of additional income on the table.
The Packers already had ruled out two other players this week: right tackle Bryan Bulaga and safety Morgan Burnett. Bulaga tore the ACL in his right knee against the Lions and will miss the rest of the season. Burnett suffered a groin injury and won't play this week.
Information from ESPN's Rob Demovsky and Field Yates and The Associated Press was used in this report.