The team announced it will not re-sign the 35-year-old Milloy, who can pursue other options when free agency begins on Friday.
Milloy was the Falcons' starting safety the last three years. This past season, he was third on the team in both solo tackles (76) and overall stops (117).
"As an organization, we felt it was in the best interest of both parties to let Lawyer test the free agent market," Atlanta general manager Thomas Dimitroff said. "He significantly contributed in his three seasons with the Falcons and we were proud to have him here. We wish him the best as he takes the next step in his career."
Milloy, raised in Tacoma, Wash., has expressed a desire to return home to finish his career with the Seattle Seahawks, who are now led by former Falcons coach Jim Mora.
Milloy broke in with the New England Patriots after being drafted in the second round in 1996. He played seven seasons with the Patriots and three with the Buffalo Bills before signing with the Falcons in 2006.
Even though he provided leadership to a young secondary, the Falcons decided to pursue younger options at safety, perhaps through the draft.