Nelson signed a two-year, $14.2-million deal with the Raiders last offseason following 10 seasons with the Green Bay Packers.
But the 33-year-old struggled to replicate his Packer form in Oakland, even after the Raiders shipped out Amari Cooper midway through the campaign. The veteran pass-catcher finished with 739 yards, the second-lowest total of his career as a starter, and found the end zone just three times.
Nelson's place on the 2019 roster appeared to be assured after the Raiders pushed forward his bonus in December.
The Raiders will gain $3.57 million in cap space by cutting the former Pro Bowler.