"At this point, we are heading in a different direction," club executive vice president Mike Flanagan told the Baltimore Sun.
Sosa, 37, who was acquired from the Chicago Cubs for second baseman Jerry Hairston and two minor leaguers, hit .221 with 14 homers and 45 RBI in 102 games.
It also was reported that he and Miguel Tejada had a disagreement that led to an icy relationship between the two Dominican Republic superstars.
While Palmeiro's season included collecting his 3,000th hit, it was his failed drug test that caused a commotion. Palmeiro, 41, continues to deny he intentionally took steroids, but he has no concrete proof as to why stanozolol was found in his system during a May drug test.
Palmeiro had just two hits in 26 at-bats after returning from his suspension and was booed by spectators at Baltimore and on the road. He was sent home to Texas to rehabilitate injuries; the Orioles eventually told him not to return to the team.
Information from The Associated Press was used in this report.