The six-year veteran quarterback who drew particular attention and headlines last season by not standing for the national anthem, met with new general manager John Lynch and coach Kyle Shanahan before making the move.
The Niners aren't ruling out a reunion with Kaepernick -- "We left that door open in a very real and positive way," Lynch said Thursday at the NFL combine -- because San Francisco will have no quarterbacks under contract for 2017 at the start of the new league year.
Kaepernick made a meteoric rise with the 49ers under coach Jim Harbaugh, leading them to the 2012 NFC title and a close loss to Baltimore in the Super Bowl. But his career spiraled in recent seasons, and he was benched for journeyman Blaine Gabbert.
Kaepernick threw for 2,241 yards, 16 touchdowns and four interceptions in 11 starts in 2016. He's thrown for 72 touchdowns since joining San Francisco as a 2011 second-round draft pick.
His decision leaves the team with no quarterbacks on the roster. Gabbert and Christian Ponder also are free agents.
"You've got to do your homework and look into everything," Shanahan told the team's website.
Kaepernick originally signed a $114 million, six-year contract with the 49ers in 2014, but restructured it down to a two-year deal last October -- one day after replacing Gabbert as San Francisco's starting quarterback.
The new contract, much more franchise-friendly than the original deal, converting Kaepernick's game bonuses into guaranteed money, included the clause allowing him to become an unrestricted free agent in 2017.
Kaepernick, 29, has indicated he plans to stand for the anthem next season. He knelt through the "Star Spangled Banner" all of last season to protest police brutality and the treatment of minorities, drawing criticism and acclaim alike.