Gonzalez, a three-time All-Star, signed a minor-league deal with the Indians in March but was unable to find his form at the plate. He hit 210/.282/.276 with just two home runs over 117 plate appearances with Cleveland.
The 33-year-old has a .845 OPS over a career split between the Indians, Oakland Athletics, and Colorado Rockies.
Indians manager Terry Francona said the decision to DFA Gonzalez wasn't an easy one.
"You know, it was so hard because we loved the way he carried himself," Francona said, according to Mandy Bell of MLB.com. "We loved his professionalism. And there's a lot to be said for that. We weren't seeing the offense that we needed and he said that, too.
"Does it come with another 100 at-bats? We don't have a crystal ball and none of us is smart enough to know what the next 100 at-bats might bring."
This is the second time this season the team has moved on from a high-profile veteran slugger as Hanley Ramirez was also designated for assignment and ultimately released at the end of April.
In a corresponding move, the Indians have recalled catcher Eric Haase from Triple-A Columbus.