Tampa Bay remains responsible for the remaining $5,494,624 owed the 29-year-old infielder from his $7 million salary in the final season of a $12 million, two-year contract.
The Rays expressed an interest in having him join Triple-A Durham.
Tsutsugo hit .167 with five RBIs in 26 games this season. It follows a disappointing 2020 when the left-handed hitter had a .197 batting average with eight homers and 24 RBIs over 51 games.
"The results are certainly not what we intended when we did this," Tampa Bay general manager Erik Neander said. "Nobody knows that more than Yoshi himself. The work ethic, the professionalism, the quality of teammate, more sadness for a decision like this than anything else. Obviously we'll do all we can to support him as we go forward."
Tsutsugo had been getting playing at time at first base but the Rays are expecting regular first baseman Ji-Man Choi, who is rehabbing at Triple-A Durham after arthroscopic right knee surgery, to be back soon.
"The opportunity for him just wasn't going to be that sizable," Neander said.
Tsutsugo had a .285 average with 205 homers and 613 RBIs during 10 seasons with Yokohama in Japan's Pacific League, including 44 homers and 110 RBIs in 2016.
Tampa Bay also reinstated left-hander Ryan Sherriff from the restricted list and optioned him to Durham. Infielder INF Kevin Padlo was recalled from Durham.