Drummond, who hasn't played since mid-February, began negotiating terms of the buyout with the Cavs on Thursday after the club didn't trade the 27-year-old before the deadline.
The agreement ends a partnership that became awkward when the Cavs benched Drummond to give young center Jarrett Allen more playing time.
Despite losing his role with the team, Drummond, a two-time All-Star with the Detroit Pistons before coming to Cleveland last year, stayed engaged with his teammates and didn't become a distraction. He often sat among the Cavs coaches during games, offering tips and encouragement.
"I want to thank Andre for his contributions to our team both on and off the court, and for his professionalism and mutual cooperation as we navigated through this process with him and his representation," general manager Koby Altman said. "We have great respect for Andre as a person and a player here in Cleveland and we are happy to have reached an outcome that is in the best interest of both Andre and our team."
One of the NBA's top rebounders and a proven scorer, Drummond was under contract for $28.7 million this season and is expected to draw interest from several contending teams.
He averaged 17.5 points and 13.5 rebounds in 25 games before the Cavs decided to give Allen the bulk of playing time.
Drummond twice made the playoffs with the Pistons, who selected him with the ninth overall pick in 2012.