The move means the Bobcats starting point guard will report on time to training camp next week, then become an unrestricted free agent next summer.
"Raymond didn't want this to be a distraction to his teammates or to the organization going into training camp. So we just decided it was time," agent Kevin Bradbury said. "Raymond wanted to move on. He didn't want this to linger anymore."
Felton averaged 14.2 points and 6.7 assists last season and won over new coach Larry Brown, who said keeping Felton was a top offseason priority.
Felton also repeatedly said he wanted to stay in Charlotte and sign a long-term deal, but the two sides were never close.
Bobcats general manager Rod Higgins met with Bradbury in Las Vegas in July, but the talks ended quickly with the two sides were far apart on money. Bradbury said discussions resumed in the last couple of weeks, but a deal wasn't imminent.
Bradbury declined to reveal the contract numbers they wanted, but said Felton holds no hard feelings toward the organization. The Bobcats made few moves this offseason and are under orders from owner Bob Johnson not to reach the luxury tax threshold of $69.9 million in payroll.
"There were just too many factors involved and Raymond decided that he wanted to focus on basketball," Bradbury said. "He's got big hopes for this team this year."
Felton will be under pressure to help Charlotte reach the playoffs for the first time -- and hold off D.J. Augustin for the starting job this season. The Bobcats used the ninth pick in the 2008 draft on Augustin, but Felton kept his job in 2008-09.
Brown was impressed with the 6-foot-1 Felton's toughness and eagerness to learn, but his shooting remained a weakness. He's shot less than 40 percent from the field in his four-year career, and made less than 30 percent of his 3-point shots in each of the last two seasons.
The Bobcats were the NBA's lowest-scoring team last season when they went 35-47. They'll face a difficult task reaching the playoffs this season in the improved Eastern Conference.
The Bobcats report to training camp Monday. The first workout is a day later.